What is a Director's Loan? Contractor Accountants

This will again credit the Director Loan Account to show that your company is due you X amount in expenses. Once the payment is made from the ... 01162437868menuclearServicesarrow_backBackAllServicesLimitedCompanyAccountantsSelfEmployedAccountantSelfAssessmentsIR35ConstructionIndustrySchemeContractorInsuranceWhoWeHelparrow_backBackWhoWeHelpSmallBusinessAccountingSoleTraderAccountsContractorAccountantAccountantsforFreelancersAccountingforStartupsPropertyAccountantConstructionAccountingHowWeWorkarrow_backBackHowWeWorkSwitchingAccountantFAQsWhyChooseUs?PricingKnowledgeHubarrow_backBackNewsGuidesApplyOnlineContactWeuseCookies.ContinueorLearnMoreclosecloseNewName,SameValuesQdosAccountinghasanewname!Wehaverecentlyrebrandedunderanewname,QAccounting.We'restillthesamepeopleandofferthesameamazingserviceswhichhavebeenrefinedover30yearsintheindustry.LearnMoreADirector‘sLoaniswhenyoutakemoneyfromyourbusinessthatisn’tasalary,dividendorexpenserepaymentandyou’vetakenmorethanyou’veputin.YoumustkeeparecordofanymoneyyouborrowfromorpayintotheCompanyandthisrecordisusuallyknownasa“director’sloanaccount”. Amountsduetothedirectorfromthecompanyshouldberecordedinthecompany’sbooksasacreditorwhiletheamountsduefromthedirectortothecompanyshouldberecordedasadebtor.Yourpersonalandyourcompany’staxresponsibilitiesdependonwhetherthedirector’sloanaccountis:overdrawn–youowethecompanyincredit–thecompanyowesyou,astheDirectorIstheLoanclassedasabenefitinkind?Iftheloanexceeds£5,000atanytimeintheyearthenabenefitinkindhastobecalculatedonthedirector’sformP11D.Ifthedirectorpaysthemarketrateofinterest(currently4%)dueontheloanthentherewillbenobenefitinkind.However,theloanamount,benefitinkindcalculationandinterestpaymentsshouldstillbeshownontheformP11D.Iftheloandoesnotexceed£5,000intheyearthenthereisnobenefitinkind.TaxImplicationsofhavingaDirector’sLoanAccountWhetheryourbusinesshastotellHMRCthatyourdirector’sloanexists–andpaytaxontheoutstandingloanamount–dependsonwhentheloanisrepaid.ThisisnotstrictlyspeakingCorporationTax–itisclassifiedas“Section455CTAtax”andiscurrentlychargedat25%oftheoutstandingamount.However,inpractice,youcalculatetaxonyouroverdrawnloanonyourCompanyTaxReturnandaddittotheCorporationTaxthatisdue.Thefollowingexamplesdemonstratehowtoworkoutiftaxisdue,andhowmuchYoupayoffyourdirector’sloanaccountbytheendofyourcompany’saccountingperiod.YourbusinessdoesnotpaytaxontheloanandyoudonotneedtotellHMRCabouttheloanonyourCompanyTaxReturn.Youpayoffyourdirector’sloanaccountwithin9monthsoftheendofyourcompany’saccountingperiod.Yourcompanydoesnotpaytaxontheloan. However,youmustincludedetailsofthatloaninyourCompanyTaxReturn.Yourepaypartofthedirector’sloanwithin9monthsofthecompany’syear-end.Taxischargedontheremainingbalance. Forexample,ifthebalanceoftheloanfromthebusinesstothedirectorwas£10,000asat5April2013,andwas£5,000asat6January2014,thetaxwouldbeliableontheremaining£5,000i.e.£1,250.Thiswouldbeincludedinthe5April2013taxreturn.Whatiftheloaniswrittenoff?Ifyourbusinesslendsyoumoneyandthenwritesitoff(meaningyoudon’thavetopayitback),theloancountsasyourpersonalincome.Youwon’thavetopaytaxontheamount(unlessyou’reahigherratetaxpayer),butyou’lloweClass1NationalInsurance.HowdoIhaveaDirectorLoan?Ihavenevertakenaloanfromthecompanybefore.Thisisoneofourfrequentlyaskedquestionsfromourclients. Thetitle,DirectorLoanismisleadingasthebalanceismadeupseveralfactors,notjustanactualloandrawn. Thedirector’sloanbalancetakesintoaccountthesalarypayslips,expenseclaimsandallwithdrawalsforsalary,expensesanddirectorsloans.Salaryexample:Ifwerunapayrollforyouofsay£1250.00gross,equatingto£1000.00net–whichyoushouldpayyourself,the£1000.00salaryduecreatesacreditintheDirectorLoanAccount(DLA)untilsuchtimethatyourcompanypaysyourselfthesalary –toshowthatthecompanystillowesyou,asthedirector,£1000.Whenyoupaythesalarytoyourself,thisdebitstheDirectorLoanAccountandassumingyoumakethecorrecttransferof£1000.00–thenthiswouldeffectivelycancelthepreviouscreditentry.Expensesexample:Whenyousubmitanexpenseclaimformtous,weprocessitatthisendandasaresultthiswillshowthatthecompanyisdueyou,asemployee,funds–assumingyoupaidfortheexpensepersonally.ThiswillagaincredittheDirectorLoanAccounttoshowthatyourcompanyisdueyouXamountinexpenses.Oncethepaymentismadefromthecompanytoyoufortheexpenses,thiswilldebitandcancelthepreviouscreditentryintheDirectorLoanAccount.ArrangeaCallback!Ifyouwouldliketolearnmoreaboutdirector’sloans,thenfillintheformbelowandoneofourexpertaccountantswillbeintouch!Alternatively,callusnowon01162437868.Anyinformationyousupplyisprotected.Formoreinformationpleasereadour PrivacyPolicy.FistName*LastName*Phone*CommentsCAPTCHAThisiframecontainsthelogicrequiredtohandleAjaxpoweredGravityForms.MorePostsWhatisCapitalGainsTax?UnderstandingCapitalGainsTaxiscrucialifyouownvaluableassetsorplanoninvesting.ReadourguideonCapitalGainsTaxanddiscoverhowyourareaofinvestmentisaffected24December2021ChristabelStevensWhattaxreliefsarethereforUKstartups?Accountingforstartupsisn’talwaysassimpleastakingonanexistingbusinesswithlotsofsetupandstructuralaspectstoconsider.However,onthefinanceside,thereareincentivesonofferintheUKtohelpthesebuddingenterprisesgrow. 17December2021ChristabelStevensWhat’sthedifferencebetweenaSoleTraderandaLimitedCompany?Moreandmorepeoplearechoosingtostarttheirownbusiness.Shouldyouregisterasasoletraderorformalimitedcompany?Findoutmoreinthispost.10December2021ChristabelStevenscloseLet'sArrangeACall!Whetheryou’renewtocontracting,keentolearnmoreaboutourservicesorhaveanyspecificquestions,we’dbedelightedtohearfromyou.phone01162437868emailenquiries@qaccounting.comFistName*LastName*Phone*CommentsCAPTCHAThisiframecontainsthelogicrequiredtohandleAjaxpoweredGravityForms.closeGetaQuoteStep1of333%YourName*EmailAddress*TelephoneNumber*YourBusinessType*SelectBusinessTypeSoleTraderLTDCompanyPropertyCompanyContractor/FreelancerYourTurnover*YourTurnover£0-£20,000£20,000-£45,000£45,000-£85,000£85,000-£200,000£200,000-£500,000£500,000+DoyouwantustocompleteyourVATreturns*?*YesNo*VATregistrationiscompulsoryforbusinesseswithaturnoveroverandabove£85,000Doyouwantustomanageyourpayroll?*YesNoNumberofEmployees*Doyouwantustocompleteyourbookkeeping*?*YesNo*Weofferin-housebookkeepingservicesorintegrationviaXeroNumberoftransactions*permonth:*0–5050–100100–200200+*Atransactionisonebookkeepingentry.i.e.asale,purchase,paymentorreceiptDoyouwantustocompleteyourself-assessmenttaxreturns?*YesNoHowmanyarerequiredperyear*?**Onlychoosemorethan1Self-AssessmentperyearifyouhaveadditionalDirector/ShareholdersthatrequirethisserviceNotethatQAccountingwillcontactyouviatelephoneandemailregardingyourquote.Wedonotshareyourdetailswithanythirdparties.ThisiframecontainsthelogicrequiredtohandleAjaxpoweredGravityForms.