The rate of tax on Directors’ Loans increased at the start of the financial year, on 6 April 2016, from 25 per cent to 32.5 per cent of any amount loaned to a shareholder during the previous accounting year, which had not been repaid within nine months of the end of that year. This brought tax on Directors’ Loans in line with Dividend Tax.
Where a shareholder is also a director and interest is charged below three per cent, income tax becomes due on the difference between the rate charged and the three per cent.
While it is best to avoid overdrawn Directors’ Loan Accounts where possible, they do arise out of necessity in some circumstances, and we will be pleased to advise.
Link: Gov.uk Directors’ Loans
