Paying back loan to LTD with interest

[minstrel]

<£5k pa and year end are the accpetable but unofficial limits

It looks like £5K is a reasonably official limit:

"No tax is chargeable if the total balance outstanding on all beneficial loans does not exceed £5,000 throughout the year of assessment in question."

http://www.hmrc.gov.uk/manuals/senew/SE26140.htm

Also from the P11D working sheet:

"If the total amount outstanding on all the loans is not more than £5,000 at any time in the year, there is no need to complete this working sheet or Section H of form P11D."

http://www.hmrc.gov.uk/worksheets/p11dws4.pdf

[malvolio]

Directors Loan of upto £5k is interest free. I think it has to be payed back before the company YE or financial YE. I'm sure an accountant can tell you more, or there are plenty of people who have done this on this site.

That is actually a bit of an urban myth. The concept of a director's loan is that it goes from the director to the company, not the other way round!

In reality, Hector will turn a blind eye to small amounts loaned in the opposite direction providing they're paid back in short order (<£5k pa and year end are the accpetable but unofficial limits) but strictly speaking they should be treated as BIKs or as part of salary. Certainly they should be considered as exceptional events, not regular ones.

[Sockpuppet]

Directors Loan of upto £5k is interest free. I think it has to be payed back before the company YE or financial YE. I'm sure an accountant can tell you more, or there are plenty of people who have done this on this site.

[Langkawi]

Hi Sockpupet,

Excuse my ignorance but a quick search didn't help.

Whats the difference between what I was suggesting and a directors loan?

Is the directors loan interest free? or is there a different benefit?

Cheers,
Alan

[Sockpuppet]

Why not just take a directors loan?

[Langkawi]

Thanks Sockpuppet,

Doesn't seem like a deal breaker.

Quick back of the envelope calculation:

2K loan paid back in 8 monthly installments at say 7% interest per annum, charged monthly to the outstanding balance.

Is roughly £55 notes interest I'd be charging myself which attracts just over a tenner in Corp Tax.

Reckon I could live with Gordo getting that.

If you wanted to be cute you could apply your interest charges very 3 months to cut it down (or is that straying in BIK country).

Cheers,
Alan

[Sockpuppet]

Second one.

[Langkawi]

Hi All,

Since loans seem to be the hot topic of the day.

If I was to take a loan from my Ltd and then pay it back (within the year) in installments at say 7% interest. Does that mean that the interest doesn't really matter to me because its going back my company?

Or does the 7% count as income for my company and therefore attract Corp Tax?

Many Thanks,
Alan