Directors’ Loan Accounts (DLA) have been a key part of the process for many business owners and directors taking an income from their companies for years.
Often business owners will draw down on a DLA during the year and later clear the overdrawn balance with a dividend or bonus payment at the company’s year-end, rather than, say, declaring dividends more frequently.
This might be done for simplicity and there are potential tax consequences associated with such DLAs, but these are rarely seen as a barrier for irregular short-term loans. In particular, this is because HMRC’s official rate of interest, which is the rate which HMRC considers should be charged on such loans, is currently quite modest at 3.75% from 6 April 2025, up from…
