Director Loan Account Explained 2020-2021

The Director Loan account is an extremely useful tool available to a company director. It allows you to extract liquid cash from your company for personal use as well as being able to lend your company money should this need arise. In this video we're explaining the basics of the Director Loan account as well as how the accounting works for overdrawn director loan accounts & loans to a company from a director.
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⏱️ Time Stamps:
0:49 - What Is A Director Loan Account?
1:24 - How Much Can A Director Borrow / Lend?
2:21 - How Does the Accounting Work for a Director Loan Account?
3:01 - What Taxes Are Potentially Payable On a Director Loan Account?
5:32 - Recommended Paperwork [FREE DOWNLOAD]
If you want my & my team's expert accounting and tax help, you can book a discovery call through our website → 🌏 www.aidhanfinancial.com/
Put simply, a Director Loan is money you take from your company that is not a salary, dividend or money you have not previously loaned your company. The director loan account can take 1 of 2 forms: If you borrow money from your company this can be referred to as an Overdrawn Director Loan account, and when you lend money to your company and this can be referred to as a Loan From Director.
In this video we'll also explain the Section 455 Tax Charge, which is incurred when you have an outstanding director loan and you haven't paid it back within the 9 month window after your company year ends. The S455 tax charge is 32.5% of the total loan amount, which is potentially quite a hefty sum to pay over to HMRC, the good news is that you can claim this back whenever you have repaid the director loan.
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#directorloan #directorloanaccount #directorloanagreement

[@tonydCFO]

Have you got a director loan with your own company. Whether it's you that has borrowed money from it, or acting as a lender to your company. Do you find the director loan mechanism confusing or beneficial? Let us know in the comments below. Time Stamps: 0:49 - What Is A Director Loan Account? 1:24 - How Much Can A Director Borrow / Lend? 2:21 - How Does the Accounting Work for a Director Loan Account? 3:01 - What Taxes Are Potentially Payable On a Director Loan Account? 5:32 - Recommended Paperwork [FREE DOWNLOAD]

[@lyallpurBlues]

what are the charges to set up a director loan?

[@victordelima766]

Thank you so much. I was having a bit of a panic thinking my company would have to pay this tax on a loan in made to it. The director loan terminology is exceedingly confusing. Furthermore my accounting software started using this ai advice bot that totally led me astray. You saved my bacon

[@abdulwaheedkhan9962]

I really impressed by your simple and straightforward explanations. looking forward to part 2!! Thank you.

[@tonydCFO]

Hi Abdul, thank you for your encouraging comment. Part 2 will be released soon...

[@ashishkhedekar]

​@@tonydCFO The first video was really great and very informative. Have you released the Part 2 of this video?

[@stephencribbett4685]

Can you please share the link to part 2 of this video

[@mcc8052]

Hi, good material, however the link for documentation doesn't work. Can you please re-upload it?

[@remaliaponapamodeley4621]

Hi Tony .Thanks for the video very helpful.

[@Longbellytv]

Very informative, thank you!

[@neatcompany7951]

Very helpful, thank you.

[@tonydCFO]

You're welcome Neat Company 😊

[@khawajadanishaltaf1847]

Beautifully explained. Thorough and Concise at the same time. Thank you so much. Would someone please confirm the double entry to account for interest income for the company? Is the one below correct ? Cr Interest Income 500 Dr DLA 500

[@mohammedazeem6329]

thank you for covering this topic

[@tonydCFO]

Hi Mohammed, you're absolutely welcome.

[@theforexcodes8133]

Loan agreement link not working

[@WH05DAT]

Legend

[@u7617]

Can close friends and family help you raise funds by purchasing your goods to help you raise money to pay off the directors loan owed to you from the company

[@fumanchu9701]

Thanks for this video. Really helpful, and looking forward to part 2 about the bed and breakfasting rules. Have subscribed.

[@tonydCFO]

You're welcome Fu Man Chu and thank you for subscribing.

[@melkor6069]

Second this

[@neilhunter3144]

where is part 2?

[@exclusivetechnologiesuk9311]

Great video, detailed, to the point and very well structure, so thank you 😀 Q. Can my company owe me my salary as a loan, say I have a DSA in place for £60k salary but only draw £15k and write a loan note for the remaining £45k? Business has enough liquidity to support my £60k salary but cash flow warrants a sacrifice from the director until the liquidity has improved. Please advise if it is possible? Thank you 😊

[@tonydCFO]

Thank you for positive comment and support Exclusive Technologies UK In short, yes you can - the cleanest way to do this is draw down your salary in full each month (and ensure all your PAYE taxes are paid) and simply (as a separate transaction) loan back funds to your company under the Director Loan Account

[@SolidusSheep]

Template no longer exists on their pages.

[@counterinstitute]

Hi, I could not find an agreement template to download vis the link in description.

[@kornwer3244]

They've moved their content and sadly do not redirect to their new pages. Look here: accountingtaxacademy.com/wp-content/uploads/2021/08/Directors-Loan-Agreement-Unsecured-2.doc

[@Barnabie]

Thanks so much for this video

[@tonydCFO]

You are so welcome Boakye. Thank you for your comment.

[@MominNz]

im getting 1 CPD point. thanks

[@tonydCFO]

You're welcome MOMINNZ 😊

[@bigboldbicycle]

The link to download the loan agreement template doesn't work? Any updated link?

[@michaelh1067]

I am loaning my company £40k to purchase an off-plan property that will be completed in the following tax year, thus Ltd will not make money in 1st tax year. I also have £50k Bounce Back Loan and plan to make other investments with it. If I set an interest rate of 8%, is that the rate the Ltd pays me back for loan AND rate I pay for withdrawing the Bounce Back Loan? Is it worth setting up interest on the loan given the additional paperwork etc?

[@AbHoOd100]

If i was to form my company as an entrepreneur and lets say it costed me 1k to form the company and a further 100k to set up the company so it can begin trading (to product develop a new concept, market it and mass produce along with shipping and customs costs). from the moment my company is formed, lets say my company profits 1m with 600k being my company’s net profit. Can i personally claim the 100k that it costed me tax free? And if so can i at the point my company is formed, charge my company internet?

[@qasimazhar773]

Thanks from Kannada 🇨🇦

[@tonydCFO]

You're welcome Qasim, from the UK :-)

[@chrismolloy3295]

Great video! To clarify then, I can lend my new ltd company 100k, interest free, to buy a buy to let property. The rent received from the property is paid from the company back to me as the director and there is neither corporation tax nor income tax as there is no interest on the loan? Is that right?

[@tonydCFO]

Hi Chris, thank you for your question. You can go along to our Q&A section where you can post your question and get a response from a qualified accountant or chartered tax advisor >>> accountingtaxacademy.com/qa-section/

[@ps6725]

Hello Tony, Glad to find you here. My name is Jai and I am in a difficult situation - really stuck between my accountant and his liquidator(referenced by him). I have Bounce Back Loan intact (36K) + 20K as Corporation Tax our company owe to HMRC [for FY20(2019)]. My accountant has suggested to included all the dividends under Directors Loan account and get that written off by the liquidators. But I have a doubt that the liquidator will point at that big figure and will try to get more money from creditor or from me. If we dont do put that amount under DLA this then we might have to pay personal tax (taxed at 7.5% for the dividends taken). There are 2 directors and both the directors have take roughly 30K in this year as dividend...Shall I let him put all that 60K under Directors loan or shall I split that amount half as Dividend and half as Directors Loan. I am abit not convinced with him it seems he is trying to take advantage of my especially in this difficult situation. I hate this and so far my search for a real genuine accountant has not ended in the UK. Hope to have your though and sorry for such detailed query. Cheers Jai.

[@tonydCFO]

Hi Jai, we hope you are well. Given the length and nature of your query, we strongly suggest having a call with one of our qualified accountants who can help you. The call is for 15 mins and at no charge. You can book here calendly.com/aidhan/i-have-a-query-and-need-to-talk-with-an-accountant

[@mohamedsalahudeen8376]

hi my question is if u draw dividends from a company say 10000 pounds and use this dividend to settle the loan which will be deemed to be dividend received. in which case do you have to show this 10000 as dividend income in your personal tax return

[@tonydCFO]

Hi Mohamed, thank you for your question. In general yes you do have to declare the dividend regardless of how you use it. If you want to elaborate further on this or any other question(s) please feel free to head on to our bitesized advisory area >>> aidhanfinancial.com/bitesize-advisory/