Jet Accountancy

If you take more money out of a company than you’ve put in – and it isn’t salary or dividend – it’s called a director’s loan.

A director’s loan account cannot be used by sole traders. It is, as the name suggests, a loan account for company directors.

It is important to note that a director’s loan account is not the same as your business bank account or your personal bank account. Instead, it is a “virtual” account that only exists as a means of keeping track of the money that flows between you and your company. This is because, unlike sole traders, your limited company is separate from you.

What this means is that the money your limited company earns belongs to the company, not to you. Of course, there are ways for you to withdraw money from the company, and the director’s loan account keeps track of the interactions between you and the company.

Overdrawn account

You will owe any money you took from the company at the year end, as you will pay dividends after tax. So many people get caught out by this and end up without enough profit left over after tax to fully clear the director’s loan account with dividends. If you have an overdrawn director’s loan account you must declare this on your Corporation Tax return and pay even more tax. The current rate of tax on the director’s loan is 32.5%.

However – it’s important to note that if you are able to repay your overdrawn amount within nine months and one day of your accounting year end, then you will have no additional tax to pay. Even though you will still have to declare the loan on your Corporation Tax return, you will get tax relief on the amount. HMRC have ensured that directors cannot circumvent this measure by taking the money out again as soon as they have paid it. If you withdraw the amount you repaid within 30 days, the loan counts as unpaid.

If you overdraw your director’s loan account by more than £10,000 (HMRC can change this amount) then it can be classed as a benefit as you are getting a loan from your company without paying any interest. This means you must declare it on your personal tax return and pay income tax. You can avoid this by paying interest in your director’s loan equal to or in excess of the rate demanded by HMRC.

This is particularly important to bear in mind if you use your director’s loan account to lend to others as well, such as your spouse, relative or anyone else closely connected to you.

If you’d like to know how we can help you with all of this, or with anything else, feel free to give us a call on 01366 858538 or email us at info@jetaccountancy.co.uk.

What is it?  The Marriage Allowance lets you transfer £1,150 of your Personal Allowance to your husband, wife or civil partner if they earn more than you,

This reduces their tax by up to £230 in the tax year.

To benefit as a couple, you (as the lower earner) must have an income of £11,500 or less.

You can backdate your claim to include any tax year since 5 April 2015 that you were eligible for Marriage Allowance.

Who can get it? This is the most important factor as only people with these specific circumstances will be able to apply:

• You’re married or in a civil partnership.
• One of you needs to be a non-taxpayer, which usually just means earning less than the £11,500 personal allowance.
• The other needs to be a basic 20% rate taxpayer (higher or additional-rate taxpayers aren’t eligible for this allowance). This means you’d normally need to earn less than £45,000.
• You both must have been born on or after 6 April 1935.  If not, you may be eligible for Married Couple’s Allowance.
• New. A rule that came into effect from Wednesday 29 November 2017 allows you to claim even if your partner has died since April 2015 and all the other criteria above apply.

It won’t affect your application for Marriage Allowance if you or your partner are currently receiving a pension or living abroad.

In most cases, the allowance will be given by adjusting the recipient partner’s personal tax code. The partner who transferred their personal allowance will also receive a new tax code, if employed. If the recipient partner is in self-assessment, it will reduce their self-assessment bill.

Already applied in the last tax year? You’ll automatically get the marriage tax allowance this year and only need to inform HM Revenue & Customs (HMRC) if your circumstances have changed making you no longer eligible.

For further information on this or if you wish us to apply on your behalf, please do not hesitate to contact us on 01366 858538 or email info@jetaccountancy,co.uk.

The cost of an annual staff party is allowed as a deduction for tax purposes. However, the cost is only deductible if it relates to employees and their guests, which would include directors in the case of a company, but not sole traders and partners in the case of unincorporated organisations.

As a company director, you are entitled to provide an annual event for yourself, any staff you employ, and your partner, and reclaim the costs against the company, as long as the cost per head does not exceed £150 (including VAT).

The cost per head can include accommodation, transport, and food and drink – but must not exceed the £150 threshold.

You may decide to hold several events throughout the year, but the total claim for all events must not exceed this threshold.

To calculate the cost per head, HMRC states that you should ‘divide the total cost of each function by the total number of people (including non-employees) who attend in order to arrive at the cost per head.

Furthermore, an employer may provide employees with a seasonal gift, such as a turkey, bottle of wine or a box of chocolates at Christmas. All of these gifts are considered to be trivial and as such are not taxable.

One cautionary regarding VAT and staff gifts is that VAT is chargeable by the employer when an employee receives gifts totalling more than £50 in a year.