Director Loan Accounts
It is important for any director to understand the rules and regulations regarding Director Loan Director’s Loan Accounts (DLAs).
What are director’s loan accounts?
Although the money in your limited company’s bank account belongs to the company, you can withdraw money from it as a director of the business by applying for a Director Loan.
HMRC defines a director’s loan as money received from your company that is neither:
a wage, dividend, expense, or funds that you have already lent or invested in the company.
You will either owe the company money or the firm will owe you money, depending on the status of your DLA at the conclusion of your business’s financial year. This will show up as an asset or a liability on the balance sheet of your company’s annual records.
Your accountant and HMRC will monitor your DLA annually to ensure that the rules are being followed.
If you pay back the director’s loan in full within nine months and one day after the conclusion of your trading company’s fiscal year, there won’t be any tax due.
A canny director might take advantage of the rules and enjoy almost 21 months of the fairly benign interest rates available via a DLA before he or she has to pay the money back.
If the loan is over £10,000 then it is regarded as a benefit in kind, and a P11D return will be required.
Need additional explanations?
UnaVida Wealth Management Ltd. provides financial planning for business owners.
