Overdrawn Director Loan Account


HM Revenue and Customs will carefully inspect the Director’s Loan Account and determine whether the payments constitute a loan or a salary. If you regularly take cash from the business without declaring them as dividends, or if you take them as dividends without the company having made enough profits to declare a dividend, HM Revenue and Customs may decide that the money is in fact a salary. In this case, HMRC may force you to pay Income Tax and National Insurance contributions on the money.

For this reason, Accounts Direct advises that you do not allow the Director’s Loan Account to remain overdrawn beyond the company’s tax accounting period.



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