Receiving interest when lending your company money

Yes it can.

If a director lends its company some money, this will sit as a credit on the directors loan account for the director to draw from tax-free as and when they want to.

The company can pay the director interest on this loan but the company must deduct income tax at 20% and pay this to HMRC along with completing form CT61. The net interest is therefore paid to the director.

The notes to form CT61 can be found here but you have to request a copy of the actual form, which can also be done from the same link.

Any interest received by the individual will need to be included on their self-assessment tax return showing the tax that has been deducted at source and paid to HMRC by the company.

It is important to make sure you are extracting funds from your company in the most tax efficient way for you. If you would like to discuss this further please contact us on 0118 334 3712 or use our simple online contact form to arrange a free initial consultation.

Date published 21 Jul 2021

This article is intended to inform rather than advise and is based on legislation and practice at the time. Taxpayer’s circumstances do vary and if you feel that the information provided is beneficial it is important that you contact us before implementation. If you take, or do not take action as a result of reading this article, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.