As a director of a limited company, you have the option to take loans directly from your business as and when you require extra capital.

Before committing to a director’s loan it is essential that you are aware of how they are treated for tax.

In this blog post, we will examine 2 taxes that could potentially be levied on your loan: corporation tax and PAYE.

Corporation tax and directors’ loans

Any loan that has not been repaid to the business within 9 months of the end of the accounting period will be charged the 32.5% corporation tax rate stated in section 455 of the Corporation Tax Act 2010. Loans made before 6 April 2016 will be charged the old s455 rate of 25%.

Tax is charged on the amount outstanding, rather than the total value of the loan.

Any tax due will become payable 9 months and 1 day after the end of the corresponding accounting period and timing is therefore important when borrowing money from your business.

Taking a loan at the beginning of your company year will give you 21 months to repay in full.

Conversely, you will have just 9 months to repay if you take out a loan at the end of the company year.

PAYE and directors’ loans

Low-interest loans exceeding £10,000 are deemed benefits-in-kind and a tax will be charged on the interest saved as a result of borrowing from the company.

The loan will not be treated as an employment benefit if you borrow from the company at a 3.25% interest rate or higher.

Get in touch

Our team is happy to offer advice on directors’ loans to inject into your business.

You can contact us at or call us on 01628 631 056 for more information about our business advisory services.