Let’s set the scene.
You’re a director. You run the company. The money’s in the bank. Surely borrowing a little bit for a holiday 🏖️ / new kitchen 🏠 / “temporary cashflow reasons” 🤔 is fine… right?
Welcome to the wonderful world of Director’s Loans.
A Director’s Loan Account (DLA) is created whenever you take money out of your company that isn’t salary, dividends, or reimbursed expenses. In other words: when the company lends you money 💸. Think of it less like a free-for-all and more like borrowing your mate’s car 🚗 — fine for a bit, awkward if you never give it back.
Why HMRC Cares (A Lot) 👀
HMRC has a sixth sense for director’s loans. If your loan isn’t repaid within 9 months and 1 day after the company year end ⏰, the company gets hit with a 32.5% tax charge 😬 (yes, really).
Repay it later and you can get the tax back — eventually 🐌 — but HMRC isn’t exactly known for speed.
And if your loan goes over £10,000 at any point? Congratulations 🎉 You may also have a benefit in kind, which means more tax, more forms, and more admin 📄📄📄.
The Classic Director’s Loan Mistakes 🤦♂️
“I’ll just repay it before the year end” (spoiler: you didn’t)
“It’s fine, I’ll vote a dividend later” (only works if you have profits 💰)
“My last accountant never mentioned this” (they definitely did)
The Sensible Bit (Sorry) 🧐
Director’s loans aren’t evil 😇 — they just need managing properly. Used short-term and cleared on time, they’re fine. Ignored for too long, they turn into an expensive surprise with HMRC written all over it 📬.
If you’re not sure whether your DLA is under control — or quietly plotting against you 😈 — it’s worth getting advice before the tax bill arrives.
Because trust us: HMRC always gets the last laugh 😂📢
“Disclaimer: Paul Stankiewicz is the owner and principal at Paul Marks & Co Chartered Accountants which is the trading name of Paul Marks Ltd a Limited Company registered in England and Wales (registered number 4487645).This article is designed for the information of readers only and is the opinion of the author only. Readers should not act on any of the information contained in this article without seeking professional advice. Nothing in this article constitutes advice, nor does the transmission, downloading or sending of any information or the Material create any contractual relationship. Links to third party websites are provided as a convenience to the reader, Paul Marks Ltd does not control and is not responsible for any of those websites or their content. Paul Stankiewicz and Paul Marks Ltd accepts no liability or responsibility whatsoever for any loss or damage suffered by any user of the information contained on or accessed through this article or the Material downloaded.
