Taking a loan from myco

[aceboy]

Hi Guys, I have a large amount of cash in my-ltd-co. I have been told that I can take this out as a loan at the start of the financial year, and provided I pay it back before the end of the financial year I would just suffer a benefit in tax charge of 1.25% on the money borrowed

is this correct? are there any other tax implications I need to be aware of?

Thanks

[[email protected]]

Hi Guys, I have a large amount of cash in my-ltd-co. I have been told that I can take this out as a loan at the start of the financial year, and provided I pay it back before the end of the financial year I would just suffer a benefit in tax charge of 1.25% on the money borrowed

is this correct? are there any other tax implications I need to be aware of?

Thanks

The company will pay Corporation Tax on its profits. You will pay Income Tax on dividends distributed to you from the company. If the loan is in excess of £5k at the financial year end, you will pay tax on the whole amount of the loan also. You will receive dividend tax credits which you offset against your income tax liability.

[aceboy]

Ok but let say the company year runs from 1st August to 31st july, if I take a £10k loan on the 2nd august, and pay it in full back on 28th July, what is the liability?

Basically I am trying to use the money to off set my mortgage.... in the offset account...

[Sockpuppet]

You should pay interest at commercial rates.

The £5k limit is not set in stone but is generaly accepted amount.

So you should really pay yourco an interest rate of at least base rate (5%). Otherwise you'd be liable for tax on that 5% (or £500) so you should pay tax on that as BIK.

But ask your accountant.