Loaning Money from Your Own Limited Company

With a low cost base, minimal stocks held and very little in the way of capital expenditure, it is hardly surprising that corporate medical practices accumulate large cash balances. But with business interest rates so low at present, medical practitioners are often left scratching their heads as to how they can avoid seeing their hard earned cash effectively depreciating in the company bank account.

One option that may be available to company directors is to borrow money from their limited company. This way, the doctor has access to the company cash without crystallising significant personal tax liabilities associated with dividend distributions.

From a taxation perspective, it is important for the director to decide whether or not the company will charge interest on the loan. If interest is charged at the HM Revenue and Customs agreed rate (currently 4%), the company will effectively recognise ‘Interest Income’ within the accounts and will pay corporation tax on the amount received. As the loan is provided on arm’s length terms, there will be no personal tax implications for the recipient to consider.

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