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Director’s loans
Director’s loans can be loans taken from your company by you, another director, or by any member of your close family.
A director’s loan account is a record of the financial transactions between a director and a company.
An account can be in debit or credit dependant on the money you have taken out of the company and any money you have paid in.
If you take money from your company by way of a loan, you need to have an understanding of the rules involved.
Rules for director’s loans
A director’s loan is when you take money from the company that is not:
- a salary payment
- an expense repayment
- adividend(If your company cannot afford to pay out dividends, but they are still taken, they are treated as a loan and must be repaid)
- repayment of a loan previously paid into the company
Legally you must keep records of all the money you pay in or take out of your company. These payments are recorded in the loan account.
The Insolvency Service has afact sheet on director’s loans. You can also read more about these types of loans by following this link.
There can be tax implications depending how much is borrowed, and over what time period.
You should seek appropriate advice before taking a loan from or providing one to the company.
Published 5 October 2023
