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  • Tax

    Incorporation - Director's loan?

    Some guidance is perfectly possible without knowing ALL of the facts. It's called being helpful.

    Gary, I'm not sure it would be worthwhile charging interest. Yes, it benefits from relief from corporation tax, but other than the first £1000 (basic rate taxpayers) or £500 (higher rate taxpayers) it's then taxable in the hands of the director, and at a higher rate (20% or 40% etc). And one might not even be in a position to take advantage of those £1000 or £500 allowances if one has other savings income, which is likely.

    Not to mention the extra paperwork created, quarterly returns etc.

    I stand to be corrected, obviously, but I believe almost all directors loans are interest free for these reasons.

    Cheers,

    John

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    Thanks for the helpful reply Johnta,

    I understand the £1000 BRT and £500 HRT tax allowances, and they're probably not worth the admin, but I was under the impression that low incomes qualify for a £5000 allowance. I know the RAR allowance is not included in this calculation, but I'm not sure about any dividend income.

    https://www.gov.uk/apply-tax-free-interest-on-savings


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