If you take a loan from your company and it is not repaid within nine months of the company’s financial year end, the company currently faces a corporation tax charge of 33.75% on the outstanding balance.
From 6 April 2026, this rate is increasing by 2% in line with the increase to dividend tax rates. This means the tax charge on director’s loans will rise to 35.75%.
This tax is not permanent, as it is generally repayable once the loan is repaid to the company. However, it can still create a significant temporary cash flow cost for the business.
For directors who are considering taking a loan from their company in the short term, it may be worth reviewing the timing. Taking the loan before 6 April 2026 could allow the lower rate to apply.
As always, director’s loans come with both tax and commercial implications.
If you would like to discuss your position, please let me know.