This is general information, not tax or legal advice. Rules and rates change, so check GOV.UK or ask an accountant.
If you run a limited company, the company and you are separate. Any money you take out that is not salary, a dividend or an expense repayment, or money you put in, goes through the director’s loan account (DLA).
Two directions
- The company owes you: you paid for a business cost personally or lent the company money. The account is in credit.
- You owe the company: you took out more than you are owed. The account is overdrawn.
Why an overdrawn account matters
- If a loan is still outstanding nine months after the company’s year end, the company can face an extra tax charge on it. The charge is repaid when the loan is cleared.
- Large loans, or loans with little or no interest, can create a taxable benefit for the director and extra reporting.
- Moving money in and out around the year end to avoid the charge can be caught by anti-avoidance rules.
Rates and thresholds change, so check GOV.UK or ask your accountant.
How to record it
- Create a liability account for the director’s loan.
- Record each payment you make for the company as a bill or expense claim to you, so it builds a credit balance.
- Record money you withdraw as a payment from the company, against the loan account.
- Reconcile the account every month.
See how to pay yourself as a sole trader or director and sole trader or limited company.
Keep it tidy
- Keep personal and business spending separate. See a separate business bank account.
- Review the balance before the year end.
- Clear any overdrawn balance with a salary, dividend or repayment, with advice.
How AvrioBooks helps
Use journals and expense claims to record movements against a loan account, and run the balance sheet to see it. AvrioBooks does not file Corporation Tax returns. See accounting software for limited companies.
Frequently asked questions
What is a director's loan account?
A record of money moving between a director and their limited company outside salary, dividends and expenses.
What if I owe the company money at the year end?
If it is not repaid within nine months of the year end, the company can face an extra tax charge. Check GOV.UK or ask an accountant.
How do I record it in AvrioBooks?
Use a liability account with journals and expense claims, and review the balance sheet.
Does AvrioBooks file Corporation Tax?
No. Your accountant or another service does that.
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