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Interest on a Loan from a Director to LTD Company

Hi

I am trying to understand the tax liability on interest received for a loan made by a director into a LTD company.

I can see the company pays tax on the interest at 20% thus offsetting the corp tax ... and that it needs to be declared on self assessment ... does this type of interest incur tax at the normal rate a person is liable for ? Its not interest on savings ... I can't see what the personal liability would be ? can anyone help ?

Thanks 

Comments

  • If you are referring to a beneficial loan which would be declared on a P11D then it would be taxed at your marginal rate (0, 19, 20, 21, 40, 42, 45 or 47%).  
  • If you are referring to a beneficial loan which would be declared on a P11D then it would be taxed at your marginal rate (0, 19, 20, 21, 40, 42, 45 or 47%).  
    I think it’s the other way round. 

    Interest received would be declared just like any other interest. 
  • uknick
    uknick Posts: 1,693 Forumite
    Part of the Furniture 1,000 Posts Name Dropper
    In the situation where the director has lent the company money, I assume this is what you're referring to, then the interest paid by the company to the director should be included on their self assessment return.  If they don't do a SA then HMRC should be notified if the interest is liable to tax, i.e. it exceeds any savings allowance.

    When you declare the interest payable will depend on the terms of the loan.  Does it pay interest each year, or is it all paid when the loan is repaid at the end of its term?  In most cases, as the one you reference, it would be declarable each year as that is when the Ltd includes the interest in its income statement and therefore tax return. 

    With regard to your comment "not interest on savings", all interest on savings is a result of lending money to a business, be it a bank, building society, small Ltd etc..  
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