Can I charge my company interest on money I’ve lent it?
Yes, you can charge interest on money you lend your company. The company normally deducts basic-rate Income Tax from interest paid to you and accounts for it to HMRC using CT61. You report the gross interest and tax deducted as part of your personal tax position.
These answers provide general information, not advice tailored to your circumstances. Rules can change and exceptions may apply — speak to the CASS team before making a tax, accounting or financial decision.
Treat the loan as a proper arrangement
When you lend your company money, the loan principal and any interest should be recorded separately. Agree the interest rate, when interest is payable and how the loan will be repaid, and keep the arrangement in writing. The company may obtain tax relief for interest incurred for its business, subject to the relevant rules. Interest you receive is personal income rather than a dividend or repayment of the original loan. A commercial reason for the borrowing and a supportable interest rate help make the records clear. Moving money between your own bank account and the company does not, by itself, create an agreed interest charge.
Remember the deduction and reporting duties
When the company pays interest to an individual lender, it normally deducts Income Tax at 20% and pays that tax to HMRC through a CT61 return. Returns are generally required for quarterly periods when relevant payments are made. Keep a record of the gross interest, tax withheld and net amount received. Your personal tax return should reflect the gross interest and the deduction, with the final liability depending on your other income and available savings allowances. Do not assume the deduction settles your entire tax bill. CASS can help keep the loan account, company reporting and personal tax information consistent, including checking when the CT61 payment is due.
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