Paying off directors loan Paying off directors loan
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  1. #1

    Nervous Newbie

    Join Date
    Jan 2016

    Default Paying off directors loan

    Hi all

    I have a question regarding a directors loan I am paying back. My last company accounting period finished end of July 2015. I had an outstanding directors loan of £3,500K.

    I paid off £3K in November leaving an outstanding amount of £500 which I intend to pay off this week .Unfortunately I am suddenly now in a position where I may need to take a further directors' loan of £5K. I am aware of the HMRC rules around bed and breakfasting but I wanted to confirm my understanding:

    If I was to take a directors loan of £5K this would need to be paid back by end of March 2017 but the outstanding £500 from my last directors loan would need to be paid back before the end of March 2016 to avoid having an overdrawn directors account and incurring further penalties. If I repay the £500 of my directors loan before the end of March from my directors loan for my last trading period, then it would effectively been considered as having been paid off?

    Is my understanding correct?

    Many thanks for your time


  2. #2

    My post count is Majestic

    northernladuk's Avatar
    Join Date
    Mar 2009


    Why are you buggering around with Directors loans like this when you don't understand them and why aren't you speaking to your accountant??

    You do know the limit is now 10k so not so sure B&B is a factor here? If you keep running your finances like this it will sometime soon though.

    All that said. Don't do it. Relying on directors loans to pop yourself has ended badly everytime I've seen it used like this. It has to be paid back at sometime leaving a 10k hole in that person's finances that year.....
    Last edited by northernladuk; 13th January 2016 at 11:17.
    'CUK forum personality of 2011 - Winner - Yes really!!!!

  3. #3

    Nervous Newbie

    Join Date
    Jan 2016


    Thank you northernladuk for your reply. I am in the process of moving away from my accountant. The actual reason for having to take the directors loan is because although my accountant informed me I would have to pay some tax via self assessment he neglected to tell me about payment on account. Which meant there was a significant difference between the money I had set aside for my self assessment tax bill and what I have to now pay.

  4. #4

    Super poster

    Join Date
    Jan 2009
    Near London, UK


    NLUK - the £10k limit is not relevant here as that only comes into play when considering BIK/interest.

    Any outstanding loan amount needs to be paid off within 9 months of the company year end and IMO OP's analysis of their situation is correct, but they should really confirm this with their accountant.

    The bed and breakfasting rules don't seem to apply here either - these normally apply when a loan is paid off before the 9 month deadline to avoid the s455 tax and then another loan is taken just after the deadline.

    Even if they did apply, they only bite when the loan amount is more than £5000 and the second loan was taken within 30 days of repaying the previous one (there's no time limit if the loan is over £15k).

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