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What is a director’s loan account?

Wednesday, March 29th, 2023

If you have a Limited Company, you will probably have heard us referring to your directors’ loan account. But what is a director’s loan account?

A director’s loan is defined as funds a director deposits or withdraws from the company that isn’t salary, dividends, or expenses repaid.

A record of the deposits and withdrawals are dealt with through the loan account and will result in either an overdrawn loan or a loan that is in credit.

If the loan account is in credit, then it means that the director has paid in more than they have taken out – the company owes money to the directors.

If the loan account is overdrawn, then the director has taken out more money than they have paid in – the directors owe the company money.


Loan account in credit at year-end:


Where a loan account is in credit, the balance is available for the directors to withdraw from the company without any further tax implications.

The company may also pay interest on the loan to the director. This is an allowable tax deduction in the company but is taxed as personal income of the director.

The company will pay the interest to the director net of 20% tax. The tax will be reported and paid over to HMRC using a form CT61.


Loan account is overdrawn at year-end:


Where the loan account is overdrawn at the year-end, and this cannot be taken as a dividend, there may be extra tax implications:


Where a loan is more than £10,000, and the director paid the company interest below the official rate, then this will be treated as an interest-free loan and will also be taxed as a benefit in kind.


How can we help?

 If you are unsure how much you can take from your company without resulting in an overdrawn loan account or would like further information on any of the points mentioned above, then please get in touch.





Can I employ my child in my business?

Wednesday, June 8th, 2022

Getting your children to help in your business is a useful way of getting an extra pair of hands for you and can earn them some extra pocket money. The money that you pay them will also be a tax-deductible expense in the business.

There are strict rules you must adhere to when employing your children (someone below the age of 18).

A permit is usually required from the local council’s education department before you can employ someone below the age of 16.

Age limits:

How much can you pay?

Employing your children can provide a financial benefit for both your business and your children. Please get in touch with us today if you would like any guidance on this subject.












Corporate Expenses Guide – What business costs are tax allowable for Limited Companies

Wednesday, September 15th, 2021

In general, tax-deductible expenses in a Limited Company must be wholly and exclusively for the use of the business.

If an expense has a dual purpose for both personal and business, you can only claim for the business element.

A summary of the rules for typical costs incurred by a company include:



If you are unsure if a cost is tax allowable or would like further advice on any of the above, then please get in touch with us.







Why Cloud Accounting?

Wednesday, May 12th, 2021

Why Cloud Accounting?

9 Reasons Why Cloud Accounting is the FUTURE of accounting!


  1. Automatic Bank Feeds

Cloud accounting software has a feature that allows bank transactions to be downloaded into your software daily, therefore there is no longer a need to spend hours typing out your statement line by line.

  1. You can view your companies’ financial position anywhere at any time!

Gone are the days of sitting at your computer to view your company financials; most cloud accounting software such as Xero, QuickBooks and FreeAgent have apps that can be downloaded straight onto your smartphone. You can even take pictures of your receipts and upload them directly to the app whilst you are on the go!

  1. Cloud accounting software allows multi-user access.

Multi-user access means both you and your accountant can keep up to date with your company financials. Giving your accountant access to this information puts them in the best position to advise you on your financial position throughout your accounting year.

  1. Cloud accounting software is SPACE SAVING software!

Cloud accounting software such as Xero allows you to store everything in one place. Invoices can be emailed straight into your Xero inbox. You can also attach pictures of your receipts to the relevant expense in the software – not only will you save on printing costs, but you will no longer need endless shelves to store all your invoices, simply snap and upload a picture of your receipts to your software and there is no need to keep the paper copies.

  1. You will always be logged into the most up to date version of your software.

Cloud accounting software does not need you to download updates each time there are new tax rates announced. Your software will change in line with new government finance guidelines for you.

  1. Allows for a ‘WORK SMARTER, NOT HARDER’ mindset

Running a business requires a lot of organisation and record-keeping, however, cloud accounting software can do a lot of the tedious bookkeeping work for you. From automatic bank feeds to sending automated reminders to customers that owe you money, there is a whole range of mundane tasks that your software will now complete for you giving you more time to focus on building your business.

  1. The Cost-Effective Option

In many cases, the ‘cloud’ version of the software is cheaper than their desktop counterparts.  This means you’re staying on top of the latest software whilst also saving cash!

  1. Software that is secure and safe!

As suggested by their name, online software such as Xero, Quickbooks and FreeAgent are all stored ‘in the cloud’. Unlike their desktop friends, they do not need to have regular data backups taken and the data you enter will never be lost!

Each Cloud software allows you the option to set up 2-factor authentication to gain access to the login. This means your business data will be kept safe and can only be accessed by those you allow.

  1. Data Capturing Software

Software’s such as HubDoc and Receiptbank can be used alongside your software. They use OCR technology to extract the key information from your invoices and feed them into your bookkeeping software. This can save you lots of time as you do not have to manually enter each of your invoices onto your software.


If you need any help or advice on choosing the right cloud accounting software for you please give us a call on 01785 254550.


FRS 102 Accounting Standard

Wednesday, November 2nd, 2016

The new accounting framework for small companies will become mandatory for accounting periods starting on and after 1 January 2016, and is known as FRS 102. This new framework was introduced to provide one single set of accounting policies for businesses to follow and policies which are more in-line with international standards.
Companies do have the option to early adopt the new framework, but this depends on individual circumstances.

Once FRS 102 applies to your business, it is not just the current year that is affected. The previous comparative figures also need to be adjusted for any change in accounting policies.
Some examples of the changes to the accounting framework include the valuation of investment properties, dealing with short-term employment benefits (accrued staff holidays not taken at the year end), shortened the useful life of goodwill, dealing with lease incentives and further rules regarding the calculation of deferred tax.
It is vital that these changes be properly thought through as they could have a significant impact on the results of the business, which will be filed on the public record and used to determine credit scores.
Should you require any help and assistance with regards to the transition to FRS 102, and indeed ways to improve your credit score, please call Cheadles accountants in Stafford on 01785 254550.