Directors Loan Account Help! :s

lucyxo

I have never thought about a directors loan account. But, I have read bits and pieces about it. Basically how do I open one? I'm just curious!

P.s yes, I run a limited company.

Majestic12

Its not a case about "opening" a directors loan account, it is not like a bank account. I would advise getting an accountant involved to explain the full ins and outs.

Essentially, a directors loan account is taking money out of a business if its not a salary or dividend. Its money to be paid back. There are tax implications if the loan is not paid back during a certain timeframe.

On the flipside, it can also be used to introduce extra funding/capital to the business, and this can be withdrawn anytime tax-free

CKhalvashi

I take money from my company when my current accounts gets below £x, which then goes from a loan to a dividend, and balanced out with our other shareholder on April 5th each year, leaving the balance at £0.

A directors loan is a transfer from the company to you, not a separate account.

CK

zygurat789

Majestic12 wrote: »

Its not a case about "opening" a directors loan account, it is not like a bank account. I would advise getting an accountant involved to explain the full ins and outs.

Essentially, a directors loan account is taking money out of a business if its not a salary or dividend. Its money to be paid back. There are tax implications if the loan is not paid back during a certain timeframe.

On the flipside, it can also be used to introduce extra funding/capital to the business, and this can be withdrawn anytime tax-free

Actually it is just like a bank account.
The money you put into your directors loan or current account is the undrawn dividends or salary which you have not drawn out of the company
but tax is paid on these monies in the normal way. The money is, therefore, yours and you can take it whenever you want or are able.
Any items of personal expenditure paid for by the company may be charged to the directors loan/current account.
It is not a good idea to go overdrawn on this account.

pelirocco

zygurat789 wrote: »

Actually it is just like a bank account.
The money you put into your directors loan or current account is the undrawn dividends or salary which you have not drawn out of the company
but tax is paid on these monies in the normal way. The money is, therefore, yours and you can take it whenever you want or are able.
Any items of personal expenditure paid for by the company may be charged to the directors loan/current account.
It is not a good idea to go overdrawn on this account.

It isn't bank account at all , its a record of money you have taken out of the company (not declared as salary ) less any money the company owes you , either as dividends (declared but not take ) or expenses owed to you , or any cash injection you have put into the company

If at the end of the financial year the loan account is overdrawn ie more going out then going in there are tax implications....25% on thebalance owing if not paid within 9 months

zygurat789

pelirocco wrote: »

It isn't bank account at all , its a record of money you have taken out of the company (not declared as salary ) less any money the company owes you , either as dividends (declared but not take ) or expenses owed to you , or any cash injection you have put into the company

If at the end of the financial year the loan account is overdrawn ie more going out then going in there are tax implications....25% on thebalance owing if not paid within 9 months

And how would you describe a bank account?
Directors loan/current accounts also hold undrawn salary.

lucyxo

Thank you to everyone who has replied. I now understand!
It's taking time til I get used to all the ins and outs of ltd company terms

Majestic12

lucyxo wrote: »

Thank you to everyone who has replied. I now understand!
It's taking time til I get used to all the ins and outs of ltd company terms

The most important advice is to get an accountant to help. Limited companies have a lot more admin and reporting needs than sole traders/partnerships and when you are focusing on your business, you can easily lose track. :beer: