14/07/2025
DIRECTORS LOAN ACCOUNT!🤔
Perhaps one of the most important aspects of a small businesses financials but the least understood...
This is effectively the amount your company owes you, or amount that you owe your company, at any given time.
This comes about from a range of different things:
- Using the company account to pay for personal items
- Paying for business expenses personally
- Withdrawing or putting money into the company
- Dividends
- Unpaid salary
- Directors business mileage claims, use of home as office and other expenses attributed to the business.
What will typically happen is that a director will take cash from the company through the year which will sit as an amount due back to the company. At the end of the year, you would sit down with your accountant and discuss how much dividend to vote; this then clears the loan.
You should ensure that the cash you withdraw from the company is less than the profits of the business - after all adjustments, such as tax and depreciation. Otherwise dividends are not possible and you could be left with an “overdrawn” DLA, i.e. amount due back to the company.
If this occurs, then you must “pay back” (but this could be done with interim dividends in the subsequent year depending on profits) the loan within 9 months of year-end else you could suffer S455 Tax.
If you have any questions, feel free to get in contact today👊
We keep it simple, so you can focus on your business💙
