This site uses cookies. By continuing to browse the site you are agreeing to our use of cookies. To find out more about cookies on this website and how to delete cookies, see our privacy notice.

Writing off directors’ overdrawn loan accounts: Don’t forget NICs charges!

By Kevin Read, July 2020

Kevin Read explains the different treatment for income tax and National Insurance contributions purposes when an overdrawn directors’ loan account is written off. 

It is common for director shareholders of owner-managed business to build up an overdrawn loan account during an accounting period, with a view to subsequently either clearing the loan by a dividend or getting the company to write off (waive) the loan.  

Loan write-offs are particularly common if the company cannot pay a dividend to the director that would clear the loan. This could be because there are insufficient distributable profits (which, sadly, may become very common following Covid-19) or, where there are several shareholders who all have the same class of share, paying the dividend would involve paying sizeable dividends to other shareholders too.  

&lsquo

This is one of our 1867 Premium articles

To see this article in full and unlock access to our complete library of 1867 articles click 'subscribe & unlock' below:
SUBSCRIBE & UNLOCK

Subscriptions include a 14 day free trial
+ money back satisfaction guarantee

Begin your tax saving journey today

Each month our tax experts reveal FREE tax strategies to help minimise your taxes.

To get Tax Insider tips and updates delivered to your inbox every month simply enter your name and email address below:

Thank you for signing up to hear from us!