May 2nd, 2015

Saving Tax with Directors Loan Accounts

If you have a company that owes you money there’s a great opportunity to save some tax.

In recent years many companies have been set up when a sole trader converted their business to a limited company.  Part of the tax planning at the time may have been to sell the ‘goodwill’ to the company creating a large directors’ loan account.

It’s now possible, in the right circumstances, to pay yourself interest on the loan – and get it tax free.

For example, if your company owes you £30,000 it could pay you interest at 15%* – a total of £4,500.  With careful planning you could receive this all tax free.  As an added bonus, the company can get tax relief of the interest paid – a saving of £900 in this example.

We don’t like complicated tax planning schemes – so we like the fact that this is simple and won’t have the tax man knocking at your door!

Here’s the key points you need to take advantage:

1. Your company owes money to you.  We’d suggest at least £10,000.

2. Your earned income is less than £10,600 (this doesn’t include dividends).  This will apply to many small companies who pay a modest salary with the balance as dividends.

For more details just email us and we’d be happy to discuss how we can help you.

* you’d need to pay a realistic rate for an unsecured loan to a small limited company.

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Limited Companies

by
Managing Director

Jonathan trained as a chartered accountant with Price Waterhouse (now PWC) in Liverpool before becoming a small business services manager for Grant Thornton in Warrington. He also spent three years as the financial controller for Brookside and Hollyoaks (not that he ever mentions it!).

Jonathan is recognised as a specialist in the entertainment industry and is often called upon to provide training courses and seminars for media professionals. He's also a bit of a technology geek and has been recognised with the accountancy industry as one of the most progressive accountants in the UK.
Outside of work Jonathan is very proud to be the Treasurer of the Tim Parry Johnathan Ball Foundation for Peace and to be on the Council of the Liverpool Institute of Performing Arts (LIPA)

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