@7:30 - where you talk about the company paying you a dividend as you're the shareholder and you use that to paydown the DLA....does that imply that the dividend you receive from the company counts towards your total dividends during the year and could therefore bump you up from the basic rate of tax to the higher rate? I think it does but I wanted to be clear as this to my basic understanding would mean it's not really "tax-free" as you'd have to pay the relevant tax on the dividend regardless right?
Thanks for the video. Do you have a more up to date version of this as I'm asking in March 2024 and no doubt HMRC would've changed a few things by now.
Depending on value of loan there is a 30 day rule yes, but if there is clear intention to withdraw the same amount again shortly after there is a catch all anti avoidance rule, so you have to be careful. Sometimes this will not be in play depending on how you repaid the previous loan. Hard to explain all in a comment here as scenario changes answer.
Great explaining, however could you please make it clear, if the director borrowed upto £10k from their own company and repaid the loan before the company tax return due date there will be no tax implications. However if the loan was more than £10k, holding tax will apply regardless the whole loan paid by the CO. Tax return due date?
If you have even a £1 overdue at the ~9 month after year end day the holding tax still applies to the balance. It's just there is no benefit in kind tax on the tax free loan if under £10k balance. Hope that helps!
Sorry I'm not sure I got you. So before the end of the tax year I want to bugger off to Bali. I took 10 grand out of my company as a director loan. In that case the company will not pay income tax on that 10 grand as it is not in my company .... so don't I will pay tax as I got it in the form of a loan. .... In the next tax year I will just simply use my dividends to pay the 10 grand back to my company ... Is that correct ?
The company will still pay corporation tax if you’ve made a profit. When you pay it back via dividends you also then may pay personal income tax on the dividend.
What's the difference between taking the money as a dividend or against the DLA and then clearing it by a dividend? Either way - you pay tax on the dividend...or am I missing something?
That's correct, its just you have the option of when to be taxed on the income. We expand a bit here: www.heelanassociates.co.uk/dividend-timing-saving-tax-is-all-in-the-timing/
Presuming you would pay tax on your dividend income (i.e you earn more than the personal allowance, etc) then yes you would. Basically the dividend is taxable as normal (have a watch of our dividend content if you'd like to learn more about this).
Thanks to rocket loan , when is was really difficult for me i saw comments on TH-cam about the loan company.. I wrote them.. And immediately they responded and gave me a form (five percentage) that's cool rate .. That's how i got the loan for my business contact the company you can contact the rocket loans company. For your loan
Hi, thank you for the video. I work full time (40% tax payer) and I also have a BTL. The company owes me money and i take directors loans to repay that amount.. I dont charge interest. Do i pay tax on the money repaid to me? Thanks!
Hi , I will like to know how much tax my wife that work for my company need to pay on Tax when the ammount if MORE than 10k ...? Can my wife borrow from my company 50k and pay slowly back to me with small ammount of Interest rate?
If you have more than the £10K allowable loan(so 17K was taken as loan). Is it okay to pay back the excess portion? If the ltd coy fin year is 10 sept to 10 sept and loan was taken shortly in Jan 20, whhen is loan(£10K and the £7K) due back? Many thanks
Its a difficult one to explain in a comment and we'd have more questions, but yes you can repay part of the loan. That said you have a clock ticking on ANY value of loan from the end of the company year. If not repaid in full before ~9 months after the company year end, you will likely need to pay a 'holding tax' of 32.5% of whatever the balance is.
No, the £10k is the limit to which no extra personal tax is charged/benefit created for the provision of an interest free loan. You still could though.
She can. You will have a tax consequence to the loan outstanding 9 months after year end though. Have a look for our video on ‘living on a bounce back loan’, goes into issue in a bit more detail.
Thank you for video . Am confused if the £10k loan from the company is tax deductible (for corporation tax ) or the loan is provided from profits ? Also am assuming when the loan is returned after 9 months to the company then that does incur the corporation tax due for that year
I suppose the answer is no. If you’ve got cash in the bank it’s physically possible to take it. It’s more a case of what is that money, loan salary dividend or something else.
Yes in general this possible. Unsure what you mean on the liability q. If b owes a, then b is liable to a for the money. If a went into insolvency, it would try to collect its debt from b.
Thanks to rocket loan , when is was really difficult for me i saw comments on TH-cam about the loan company.. I wrote them.. And immediately they responded and gave me a form (five percentage) that's cool rate .. That's how i got the loan for my business contact the company you can contact the rocket loans company. For your loan**
I liked the video. No filler just straight talking. It didn’t answer my question and I hope you would consider making a video to help others like me or provide me with the answer by reply. It is similar to this video but almost the situation in reverse. I have a job already so income tax is already being paid. I am setting up a limited company to deal with my hobby. Sole shareholder/director. So I want to use up as much of the tax band as possible without going into the upper band. So with that in mind. The limited company has minimal outgoings but large profit. My first transaction leaves me with £10k profit and I have another two approaching completion. Eventually I would like to take a wage as the director up to the tax band but for the time being I’d rather leave the money in and use it to grow the business. So can I agree to pay myself a reasonable figure and it is registered as money owed to me. And when I’m happy with the bank balance to then start to recoup the owed wages? Would I be liable for the tax when it was due to me or when I received the money in my personal account? There’s almost nil chance of creditors as the outgoings are so small I could cover them by my day job and just record that the company owed me money. I could obviously could start to take a wage when the bank balance was healthy but if I can make use of tax allowance band now that would be better than going into the high income tax band. Is that possible or is it the case that it doesn’t matter if I was owed the wage from 3 years ago, if I take it this year it can only be applied to the tax band for this year. Obviously it would be better to role over the allowance as then I would avoid going into the higher band. Or is it better to pay myself as a dividend at a later date and do it that way so there’s no debt against the company. Any suggestions?
Thanks for taking the time to outlay your situation. Sadly this is a little more than we can answer in a comment, but to answer one point in general - in order to get a deduction against your profits and it count as 'paid' in the tax year you want to use your allowances, you need to declare a payroll to HMRC for that year. Done correctly, you don't have to part with the actual cash in the year, you can take it later. We do a few services that can help you with this, so if you wanted to find out how we can help, please get in touch.
Thanks to rocket loan , when is was really difficult for me i saw comments on TH-cam about the loan company.. I wrote them.. And immediately they responded and gave me a form (five percentage) that's cool rate .. That's how i got the loan for my business contact the company you can contact the rocket loans company. For your loan
so what is the longest you can take a 10k loan from your ltd company Lets say my Accounting period is January 1st - December 31st If I took a loan on July 1st 2023, would it have to be paid back by September 30th 2024 (9 months after the accounting period?) Therefore what is the theoretical maximum I could take a loan for? In my head, its January 2nd? __ edit - I believe you answered that question. So 1st of Jan would be the answer for my example above - meaning you can get a 21month "interest free" loan of up to 10k per director If so that is pretty good given you can get credit cards with 2 year interest free on purchases - so it could be a good way to extend your interest free period on a big ticket purchase...?
I liked it when the accountant did the accountant voice.
😂
🤣🤣
Hehehe. 😂
@7:30 - where you talk about the company paying you a dividend as you're the shareholder and you use that to paydown the DLA....does that imply that the dividend you receive from the company counts towards your total dividends during the year and could therefore bump you up from the basic rate of tax to the higher rate? I think it does but I wanted to be clear as this to my basic understanding would mean it's not really "tax-free" as you'd have to pay the relevant tax on the dividend regardless right?
That’s right eventually you have to pay the tax when you ‘repay’ it with the dividend. It’s just tax free for the period
Thanks for the video. Do you have a more up to date version of this as I'm asking in March 2024 and no doubt HMRC would've changed a few things by now.
Oddly they haven’t changed anything material! We should probably update it just to give make that clear though.
Subscribed , thank you.
Thanks Andy
Hi, can I confirm that if director loan is overdrawn up to £10K at year end, there is 9 months after to paydown the DLA as dividends? Thanks
Generally yes, to avoid the tax charge. You could repay later but would have to pay the charge.
Just a question on bread and breakfast rule is there a definite time limit by which after paying back the 10 k loan you cannot take any loan
Depending on value of loan there is a 30 day rule yes, but if there is clear intention to withdraw the same amount again shortly after there is a catch all anti avoidance rule, so you have to be careful. Sometimes this will not be in play depending on how you repaid the previous loan. Hard to explain all in a comment here as scenario changes answer.
Great explaining, however could you please make it clear, if the director borrowed upto £10k from their own company and repaid the loan before the company tax return due date there will be no tax implications. However if the loan was more than £10k, holding tax will apply regardless the whole loan paid by the CO. Tax return due date?
If you have even a £1 overdue at the ~9 month after year end day the holding tax still applies to the balance. It's just there is no benefit in kind tax on the tax free loan if under £10k balance. Hope that helps!
Sorry I'm not sure I got you. So before the end of the tax year I want to bugger off to Bali. I took 10 grand out of my company as a director loan. In that case the company will not pay income tax on that 10 grand as it is not in my company .... so don't I will pay tax as I got it in the form of a loan. .... In the next tax year I will just simply use my dividends to pay the 10 grand back to my company ... Is that correct ?
The company will still pay corporation tax if you’ve made a profit.
When you pay it back via dividends you also then may pay personal income tax on the dividend.
What's the difference between taking the money as a dividend or against the DLA and then clearing it by a dividend? Either way - you pay tax on the dividend...or am I missing something?
That's correct, its just you have the option of when to be taxed on the income. We expand a bit here: www.heelanassociates.co.uk/dividend-timing-saving-tax-is-all-in-the-timing/
if you pay the loan off as a dividend, do you have to pay tax on that dividend payment
Presuming you would pay tax on your dividend income (i.e you earn more than the personal allowance, etc) then yes you would. Basically the dividend is taxable as normal (have a watch of our dividend content if you'd like to learn more about this).
Hi thank you for this video, can only one director take a directors loan in one financial year
No multiple directors can and in theory multiple loans.
Thanks to rocket loan , when is was really difficult for me i saw comments on TH-cam about the loan company.. I wrote them.. And immediately they responded and gave me a form (five percentage) that's cool rate .. That's how i got the loan for my business contact the company you can contact the rocket loans company. For your loan
Hi, thank you for the video. I work full time (40% tax payer) and I also have a BTL. The company owes me money and i take directors loans to repay that amount.. I dont charge interest. Do i pay tax on the money repaid to me? Thanks!
If it's repayment of your directors loan, no tax would be due.
@HeelanAssociates thank you, i think the lady at HMRC doesnt know the rules as she said it was a benefit in kind!!! Enjoy the forthcoming festivities.
@@karenmartine1776 I am unsure how much training they receive these days!
@@HeelanAssociates shocking!!
Hi , I will like to know how much tax my wife that work for my company need to pay on Tax when the ammount if MORE than 10k ...? Can my wife borrow from my company 50k and pay slowly back to me with small ammount of Interest rate?
This one may help TAKING YOUR BOUNCE BACK LOAN STRAIGHT OUT OF COMPANY (UK)
th-cam.com/video/ZUT9KSKNpoQ/w-d-xo.html
If you have more than the £10K allowable loan(so 17K was taken as loan). Is it okay to pay back the excess portion? If the ltd coy fin year is 10 sept to 10 sept and loan was taken shortly in Jan 20, whhen is loan(£10K and the £7K) due back? Many thanks
Its a difficult one to explain in a comment and we'd have more questions, but yes you can repay part of the loan. That said you have a clock ticking on ANY value of loan from the end of the company year. If not repaid in full before ~9 months after the company year end, you will likely need to pay a 'holding tax' of 32.5% of whatever the balance is.
Excellent video. Thank you.
In these cases (short-term loans under £10k), does the limited company have to charge interest on the loan?
Thank you.
No, the £10k is the limit to which no extra personal tax is charged/benefit created for the provision of an interest free loan.
You still could though.
The trouble is once ur 10k lands in ur bank it’s subject to 40% income tax on interest income…
That’s not quite correct sorry. It’s super dependant on your situation and hard to explain here the multiple ways in which that would be unlikely.
What use is tax free, if you have to repay using an already taxed future dividend.. your not avoiding any tax 🤔
Hi again, can my wife (She works for me same company) ask for a Loan of 50k for the minimum interest rate of 2.5% of the total ammount?
She can. You will have a tax consequence to the loan outstanding 9 months after year end though. Have a look for our video on ‘living on a bounce back loan’, goes into issue in a bit more detail.
Thank you for video . Am confused if the £10k loan from the company is tax deductible (for corporation tax ) or the loan is provided from profits ? Also am assuming when the loan is returned after 9 months to the company then that does incur the corporation tax due for that year
It’s outside corporation tax in reality, so neither deductible or taxable as income.
Hi there. Can you only take money back out when your co starts to make a profit? Thank you.
I suppose the answer is no. If you’ve got cash in the bank it’s physically possible to take it. It’s more a case of what is that money, loan salary dividend or something else.
@@HeelanAssociates Thank you. That’s really helpful.
Great video. If there are two directors is it 10k each?
Yeah individual loan accounts.
Can I loan from my A LTD? to my B LTD? and who will be liable for the debt?
Yes in general this possible.
Unsure what you mean on the liability q. If b owes a, then b is liable to a for the money.
If a went into insolvency, it would try to collect its debt from b.
Thanks to rocket loan , when is was really difficult for me i saw comments on TH-cam about the loan company.. I wrote them.. And immediately they responded and gave me a form (five percentage) that's cool rate .. That's how i got the loan for my business contact the company you can contact the rocket loans company. For your loan**
I liked the video. No filler just straight talking. It didn’t answer my question and I hope you would consider making a video to help others like me or provide me with the answer by reply.
It is similar to this video but almost the situation in reverse. I have a job already so income tax is already being paid. I am setting up a limited company to deal with my hobby. Sole shareholder/director. So I want to use up as much of the tax band as possible without going into the upper band. So with that in mind. The limited company has minimal outgoings but large profit. My first transaction leaves me with £10k profit and I have another two approaching completion. Eventually I would like to take a wage as the director up to the tax band but for the time being I’d rather leave the money in and use it to grow the business. So can I agree to pay myself a reasonable figure and it is registered as money owed to me. And when I’m happy with the bank balance to then start to recoup the owed wages? Would I be liable for the tax when it was due to me or when I received the money in my personal account? There’s almost nil chance of creditors as the outgoings are so small I could cover them by my day job and just record that the company owed me money. I could obviously could start to take a wage when the bank balance was healthy but if I can make use of tax allowance band now that would be better than going into the high income tax band. Is that possible or is it the case that it doesn’t matter if I was owed the wage from 3 years ago, if I take it this year it can only be applied to the tax band for this year. Obviously it would be better to role over the allowance as then I would avoid going into the higher band. Or is it better to pay myself as a dividend at a later date and do it that way so there’s no debt against the company. Any suggestions?
Thanks for taking the time to outlay your situation.
Sadly this is a little more than we can answer in a comment, but to answer one point in general - in order to get a deduction against your profits and it count as 'paid' in the tax year you want to use your allowances, you need to declare a payroll to HMRC for that year.
Done correctly, you don't have to part with the actual cash in the year, you can take it later.
We do a few services that can help you with this, so if you wanted to find out how we can help, please get in touch.
Thanks to rocket loan , when is was really difficult for me i saw comments on TH-cam about the loan company.. I wrote them.. And immediately they responded and gave me a form (five percentage) that's cool rate .. That's how i got the loan for my business contact the company you can contact the rocket loans company. For your loan
Thank youuuu
Glad it helped :)
so what is the longest you can take a 10k loan from your ltd company
Lets say my Accounting period is January 1st - December 31st
If I took a loan on July 1st 2023, would it have to be paid back by September 30th 2024 (9 months after the accounting period?)
Therefore what is the theoretical maximum I could take a loan for? In my head, its January 2nd?
__
edit - I believe you answered that question.
So 1st of Jan would be the answer for my example above - meaning you can get a 21month "interest free" loan of up to 10k per director
If so that is pretty good given you can get credit cards with 2 year interest free on purchases - so it could be a good way to extend your interest free period on a big ticket purchase...?
Sounds like you have the right idea yes. ‘Best time’ = early in accounting period ‘worst’ time = later
Clear as mud
Was there a particular point you’d like us to expand on?
OK video, but they forget to tell you the HMRC payments details for the BACS system....useless
Hi there, confused as to what you mean here - could you expand?
Waffle
Indeed.