If my company pays me interest will it be taxed? Reply


Companies often borrow from their directors, especially property companies as 100% loan to value loans may not be available from lenders.

If the company pays interest on the loan it will have to register with HMRC and prepare CT61 returns

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/383833/ct61-notes-2010.pdf

The CT61 requires the company to deduct 20% tax on the interest.

The Director may be entitled to the interest tax free

Personal Savings Allowance

You may also get up to £1,000 of interest tax-free depending on which Income Tax band you’re in. This is your Personal Savings Allowance.

Income Tax band Tax-free savings income
Basic rate £1,000
Higher rate £500
Additional rate £0

Savings covered by your allowance

Your allowance applies to interest from:

  • bank and building society accounts
  • savings and credit union accounts
  • unit trusts, investment trusts and open-ended investment companies
  • peer-to-peer lending

So the Personal Savings Allowance should cover Directors Loans as explained in accountingweb

https://www.accountingweb.co.uk/tax/business-tax/paying-interest-to-the-director

If you are lending to your company you should make sure that its at a market rate and you may want to consider your security for the loan.

You could opt for a charge at Companies House but at the very least you should have a loan agreement.

steve@bicknells.net

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