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Writing off a director’s loan

Shared from Tax Insider: Writing off a director’s loan
By Chris Thorpe, November 2023

Chris Thorpe gives an overview of the implications of writing off a director’s loan. 

Being a separate legal entity, the money within a company’s bank account belongs to that company, not the owners or directors. Tempting though it is for a business owner to help themselves to the company’s profits, they cannot do so unless it is declared as a dividend or paid as a salary or pension.  

There are other ways to extract profits, such as receiving rent for using personal property or interest on a loan made to the company. Alternatively, a close company can make a loan to a director or participator (i.e., shareholder) or their families in the form of an overdrawn loan account, but there are tax consequences. 

What are the tax implications of an overdrawn account? 

Unless the official rate of interest (2.25% from April 2023) is charged on the loan, a

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