Directors Loans or Dividends?

charge interest on directors loan account credit balances instead of using dividends Could you save tax?

The shake-up of dividend taxation announced in the last budget lead us to to say that the key to tax planning now is to look at “total tax liability”.

That means it is worth us introducing a new tax saving angle to consider: using your directors loan account.  It doesn’t apply to everybody but it could present a good opportunity for some of you.

Paying a market rate of interest on directors’ loan account credit balances is now more tax efficient than paying dividends, once the new £5,000 dividend allowance has been used. This is because higher rate tax payers face a 32.5% tax rate on dividends.

Note, the company is still required to deduct 20% basic rate income tax and pay this quarterly using form CT61.

If you are unsure whether this applies to you just get in touch for a no-obligation discussion.

We’ll be able to tell you very quickly whether more detailed tax planning will help.

Call 01384 235549 or email today.



Lewis Smith & Co. – Tax planning service. Income tax, CT, CGT and VAT