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
Click to access 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.
