Wednesday, 19 September 2018 - About DavidElliott | Rss

Getting personal

 

If your company takes out a loan, the interest payable is tax-deductible. But what if you take out a personal loan, then use the funds to give your company a cash injection? The good news is that, in certain circumstances, the interest you suffer on the personal loan is tax-deductible for you, personally, via your Self-Assessment Tax Return. So be sure to tell us if you’ve taken out a personal loan for this purpose.

What are those ‘certain circumstances? What’s interesting is that, if you already have a qualifying personal loan, on which you’re getting tax relief on the interest, and you then bring in new investors, increasing the total number of shareholders in the company to more than five, you’ll still qualify for tax relief on the loan interest. A Statement of Practice dating back to 1978 states that this is the case, even though HMRC itself recently tried to argue otherwise. And if you’re a 40% taxpayer, this relief is even more valuable. stances’? Firstly, it’s got to be a personal loan (not an overdraft). You must have used the proceeds of the loan to either buy shares in the company or lend money to the company. The company itself must be a trading company (not an investment company) and be what’s known as a ‘close company’ – that’s essentially one with five or fewer shareholders.

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