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Amazing experience
After placing an enquiry, I received a call 20 minutes later, and then 2 hours later, I had a solicitor assigned to me. They were absolutely incredible right from the word go - amazing and very prompt with replies, answering all my questions and keeping the process moving. We finally completed today and I am so unbelievably happy. I wouldn’t hesitate to use Lawhive again in the future if needed.
Lily
First class service
I initially made an online enquiry about a tricky conveyancing matter and received an immediate call back. They understood straight away what was needed and gave me a quote that was very reasonable. It was such a pleasure to find someone who was cheerful, professional and completely reassuring as I’d been getting quite anxious about the sale of my house. The service Lawhive has provided is absolutely first class and I cannot recommend them enough.
Charles
Empathetic, professional and efficient
I am an executor, selling my mother's home. I found the assistance I received from Lawhive first rate - empathetic, professional and efficient.
Mark
Great service from Lawhive
We used Lawhive for our conveyancing needs and our solicitor was very helpful, patient and informative. She helped us with our needs with prompt responses and provided a very efficient service.
Kelvin
Great service when you need clarity and calm
Our solicitor was warm, friendly and provided crystal clear communication. A lot of conveyancers assume customers know everything about the process already, so it was really appreciated to hear each stage included in the price given.
Em
Quick and efficient
We used Lawhive for a transfer of property and conveyancing. Our solicitor was so helpful and thorough with the whole process. He responded quickly and efficiently to any questions or requests that we had and explained some of the more complicated issues regarding the process clearly.
Geri
Fantastic service and experience with Lawhive
I had the pleasure of working with Lawhive doing a transfer of equity on a property. Our solicitor’s service was amazing, she responded quickly to any questions or concerns and kept me updated throughout the process. I can strongly recommend her for any conveyancing work that you may need. Fantastic service all round.
Jane
Amazing experience
After placing an enquiry, I received a call 20 minutes later, and then 2 hours later, I had a solicitor assigned to me. They were absolutely incredible right from the word go - amazing and very prompt with replies, answering all my questions and keeping the process moving. We finally completed today and I am so unbelievably happy. I wouldn’t hesitate to use Lawhive again in the future if needed.
Lily
First class service
I initially made an online enquiry about a tricky conveyancing matter and received an immediate call back. They understood straight away what was needed and gave me a quote that was very reasonable. It was such a pleasure to find someone who was cheerful, professional and completely reassuring as I’d been getting quite anxious about the sale of my house. The service Lawhive has provided is absolutely first class and I cannot recommend them enough.
Charles
Empathetic, professional and efficient
I am an executor, selling my mother's home. I found the assistance I received from Lawhive first rate - empathetic, professional and efficient.
Mark
Great service from Lawhive
We used Lawhive for our conveyancing needs and our solicitor was very helpful, patient and informative. She helped us with our needs with prompt responses and provided a very efficient service.
Kelvin
Great service when you need clarity and calm
Our solicitor was warm, friendly and provided crystal clear communication. A lot of conveyancers assume customers know everything about the process already, so it was really appreciated to hear each stage included in the price given.
Em
Quick and efficient
We used Lawhive for a transfer of property and conveyancing. Our solicitor was so helpful and thorough with the whole process. He responded quickly and efficiently to any questions or requests that we had and explained some of the more complicated issues regarding the process clearly.
Geri
Fantastic service and experience with Lawhive
I had the pleasure of working with Lawhive doing a transfer of equity on a property. Our solicitor’s service was amazing, she responded quickly to any questions or concerns and kept me updated throughout the process. I can strongly recommend her for any conveyancing work that you may need. Fantastic service all round.
Jane
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01 overview
Director’s loans are a fundamental aspect of business finance. They’re essential for maintaining transparent financial records and ensuring compliance with legal and tax regulations.
At Lawhive, our network of expert corporate lawyers is on hand to provide tailored guidance and assistance on director’s loans and director’s loan agreements to make sure you understand your rights and obligations.
Contact our legal assessment team today to find out more and get a fixed-fee quote.
A director’s loan is any money you or close family members, receive from your company that doesn’t fall under salary, dividends, or expense reimbursements. However, it doesn’t include funds you’ve previously invested in or loaned to the company.
Director’s loans can also work the other way for example, if a director lends money to the company.
A director’s loan agreement is an agreement between a company and its director that lets the company lend money to the director for various business purposes, like providing an alternative to paying a salary or funding other essential business needs.
You must have a director’s loan agreement before money moves between the company and a director. The agreement should outline the terms and conditions of the loan, as with any personal loan agreement, including repayment terms and interest rates if they apply.
A director’s loan account is a record of any money a director borrows from or pays into the company. It must show all cash withdrawals made from the company and all personal expenses paid with the company’s money.
At the end of the company’s financial year, one of two things can happen:
Interest on a director’s loan is not automatic. It depends on the agreement between the director and the company. Some director’s loans are interest-free, while others may have an interest rate attached.
If there is interest, it should be agreed and documented in the director’s loan agreement. The current HMRC director’s loan rate in use is 2.25%.
If the loan is interest-free or has a low-interest rate, HMRC may treat the forgone interest as income and tax it accordingly.
While not a requirement, it’s wise to secure a director’s loan against a property or asset. This can be done with the help of a solicitor by registering a second charge on a property owned by the company at the Land Registry. You will, however, need to get the primary lender’s consent to do this if there’s already a mortgage or loan on the property.
Both directors and their company may have to pay tax on a director’s loans. More specifically, directors may need to pay income tax, while companies may be liable to pay:
Director’s loans have to be paid back, even if the company runs into financial trouble. Unless there’s a different agreement in place, the company can ask for repayment of a director’s loan at any time.
If you’re a shareholder, you may be able to use dividends to repay a director’s loan, but if there’s not enough money to cover it, you still have to repay the loan.
If a director’s loan isn’t repaid when requested, formal steps may be necessary to recover it. An overdrawn Director’s Loan Account is seen as a company asset and during insolvency, the officeholder will pursue repayment to benefit the company’s creditors.
A director’s loan can be given for any amount. However, if a director is not also a shareholder, they need permission from the shareholders before borrowing over £10,000. If they don’t get permission and still take the director’s loan, it could be seen as doing wrong or even stealing.
You have to pay back a director’s loan within nine months and one day after the company’s year-end. If you don’t, you could face a hefty tax penalty.
The 30-day rule for director’s loans is: if you repay a loan from your company and then borrow the same or a similar amount within 30 days, the repayment is disregarded for tax purposes.
If you borrow money from your company and pay it back within 9 months plus one day after the end of the financial year, the company shouldn’t have to pay extra tax on that loan.
If you don’t repay the loan within the given time, HMRC may charge extra tax on it. This is to prevent people from using loans instead of dividends to avoid tax.
Director’s loans can offer flexibility for managing personal and business cash flow needs. They can also offer some tax efficiencies. What’s more, in emergencies, they could provide a quick solution.
No one can tell you if a director’s loan is a good idea without knowing your full circumstances, however, a corporate lawyer can certainly help you understand the responsibilities and implications of entering into a director’s loan agreement
To get help with this, contact us today.
Like any loan, director’s loans come with risks:
If you can’t repay your director’s loan, a liquidator might try to get back the money owed, especially if there are enough assets to cover costs and help creditors.
If the company is facing a winding-up petition from a creditor, the official receiver might accuse you of wrongful trading or misfeasance, which can lead to severe consequences like being banned from being a director.
You can write off a director’s loan. To do so, the company must officially declare (using a formal waiver) that it won’t collect the debt anymore and the director must report the written-off amount when filing their personal tax return.
Once the loan is written off, HMRC may consider the written-off loan as a type of salary, so the company might have to pay National Insurance contributions. What’s more, the company won’t be able to reduce its Corporation Tax by the amount of the written-off loan.
At Lawhive, our network of corporate law solicitors can support negotiations regarding director's loan agreements and accounts, as well as bring and defend claims about DLAs.
For more information, contact our legal assessment team today to request a callback.
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