This guide outlines the reporting, tax and National Insurance contributions (NICs) requirements if you charge a director’s personal bills to their loan account with the company.
On this page:
You charge a director’s personal bills to their loan account at the time you pay them and the account isn’t overdrawn.
You have:
You charge a director’s personal bills to their loan account at the time you pay them and doing so makes the account overdrawn (or more overdrawn, if it was already overdrawn).
If the amount overdrawn is to be repaid, then it counts as a loan to the director and should be treated in line with the tax and NICs rules that apply to loans – see the A to Z entry ‘Loans provided to employee’.
If the amount overdrawn is written off in favour of the director then it counts as earnings, so:
The value to use is the amount charged to the director’s loan account.
NIM12016: Directors' loan accounts - background
NIM12018: Directors' loan accounts - whether withdrawals are loans or earnings
