Limited company guide
Short answer
Yes, you can charge your company interest on money you lend it. The company can usually deduct the interest for Corporation Tax if the rate is commercial and the interest is actually paid. On yearly interest paid to you as an individual, the company normally withholds Income Tax at 20%, pays it to HMRC on a CT61 return within 14 days of the quarter end, and gives you a statement of the tax deducted. You report the gross interest on your Self Assessment return and claim credit for the tax already paid.
Lent money to your limited company? How to charge interest, what rate to use, the 20% tax deduction and CT61 return, Corporation Tax relief and your personal tax.
Last updated 10 November 2026. Official references are listed below.
Money you put into the company that is not for shares is normally credited to your director's loan account. The company owes you that money, and you can take it back tax-free whenever the company has the cash.
Charging interest is optional, and an interest-free loan creates no tax charge for you. If you do charge interest, record the amount, rate, payment dates and repayment terms in a short loan agreement or board minute.
Interest is a cost for the company, so it can reduce the Corporation Tax bill at 19% to 25%. For you it is savings income, not earnings, so there is no National Insurance on it.
Some or all of it may be covered by your Personal Savings Allowance (£1,000 basic rate, £500 higher rate, nil additional rate) or, if your other income is low, the starting rate for savings of up to £5,000.
Example: a £50,000 loan at 6% gives £3,000 of interest a year. The company withholds £600 for HMRC and pays you £2,400.
There is no set rate in law, but it should be commercial: close to what an unconnected lender would charge for a similar unsecured loan to your company. HMRC can treat interest above a reasonable commercial rate as a distribution rather than interest, so the excess loses its Corporation Tax deduction. Keep a note of how you chose the rate.
Where the loan is capable of lasting more than a year ("yearly interest"), the company must deduct basic-rate Income Tax, currently 20%, before paying interest to an individual.
The company normally gets relief as interest accrues. But if a close company owes interest to a participator, such as a director-shareholder, and doesn't pay it within 12 months of the end of the accounting period, the deduction waits until it is paid. A book entry only counts as payment if the funds are there and you can draw them without conditions.
Include the gross interest on your Self Assessment return and claim credit for the 20% withheld. Higher and additional-rate taxpayers pay the difference; if your allowances cover the interest, the tax withheld can be refunded.
Savings income tax rates are due to rise to 22% (basic), 42% (higher) and 47% (additional) from 6 April 2027, so check the numbers again before then.
LimitedCompany.Accountants can document your loan, set a sensible rate, file the CT61 returns and reflect the interest in your accounts and Self Assessment. Get a quote or book a call or ring 020 3441 1258.
Primary references
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Frequently asked
No. An interest-free loan to your own company is fine and creates no tax charge for you.
No. Taking back money you lent is a capital repayment. Only the interest is taxable.
No. Interest is savings income, not earnings.
It can accrue, but if it stays unpaid 12 months after the year end, the Corporation Tax deduction waits until it is paid.
Included approach
Check the current rules
Deadlines, thresholds and filing rules change. GOV.UK and Companies House publish the current statutory position; advice should then be applied to your company’s circumstances.
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