“Director’s Loans: The Tax Trick No One Talks About”

If you’ve ever lent money to your own company, here’s a little-known secret…

You can charge your company interest — and potentially receive it tax-free.

Yes, really!

Most directors stick to salary and dividends, but interest is the unsung hero of profit extraction. The company can usually claim a corporation tax deduction, and neither of you pays NI. A win-win before you even get to the personal tax perks.

How to Make It Tax Efficient

Use the savings starter rate (up to £5,000 tax-free)

Use your personal savings allowance (£1,000 for basic rate taxpayers)

Combine these with your personal allowance

Done right, you could extract up to £18,570 tax-free in a mix of salary + interest.

Brian’s Goldilocks Zone Tips

Keep your salary below £12,570 to unlock the full savings allowances

✔ If your spouse is on a lower tax rate, they can use the same strategy

✔ Charge a commercial interest rate — check bank loan rates and add 1–2% to reflect your personal risk

Watch Out For…

⚠ Charging interest that isn’t “commercial”

⚠ Using the loan for non-business purposes

⚠ Forgetting that the interest must be paid within 12 months⚠ Skipping HMRC admin — the company must withhold 20% tax and submit a CT61

Got questions about director’s loans, interest rates, or tax-efficient profit extraction?

Ask Brian — your trusted accountant who explains the complicated stuff simply.