Should I lend my own money to my company?

You can lend your company money as a director’s loan, with or without interest. Interest is a cost for the company and income for you, the company deducts income tax before paying it, and if the company fails you rank as an unsecured creditor unless you took security.

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How a director’s loan to the company works

The company owes you the money, and it is recorded in the company’s books as a creditor. The company pays no corporation tax on money you lend it, and you pay no tax when it is repaid, because it is your own capital coming back.

Write it down. A short loan agreement and a board minute should state the amount, the interest rate if any, when the company repays, and whether you can demand repayment at any time. A lender looking at the company later will ask about the loan, and an agreement that makes it repayable on demand reads as money that could leave the business at short notice. Some lenders ask the director to agree not to withdraw it while their loan is outstanding.

The other way to put money in is to buy shares. Share capital stays in the company, ranks behind every creditor, and comes back to you only as dividends or on a sale or winding up. A loan comes back on its terms and ranks ahead of shareholders. The choice affects what the company’s balance sheet shows a lender and what you can get back if things go wrong.

Paperwork spread across a table

Charging interest

Interest the company pays you is a business expense for the company and personal income for you. The company pays you the interest less income tax at the basic rate of 20%, and reports and pays that tax to HM Revenue and Customs every quarter on form CT61. You report the interest on your Self Assessment return, and the tax already deducted counts towards your bill. The deduction applies to yearly interest: interest on a loan capable of running for more than a year.

This is changing. From 6 April 2027 the rate of tax deducted from yearly interest will be the savings basic rate, and Budget 2026 announced a savings basic rate of 24% for 2027 to 2028. Set the interest rate at a level you could justify against what a lender would charge the company for a similar loan.

Where you rank if the company fails

Unsecured loan
You rank with the other unsecured creditors, after fixed charge holders, the costs, preferential and secondary preferential creditors, the prescribed part and floating charge holders.
Secured loan
If the company gives you a charge over its assets and it is registered at Companies House within the time the Companies Act 2006 allows, you rank as a secured creditor for those assets.
Subordinated loan
If you agree with a lender that your loan ranks behind theirs, you are repaid after that lender.
Shares
Shareholders are paid last, after every creditor.

Interest on a director’s loan

Illustrative example

You lend your company £50,000 at an assumed 6% a year, paid once a year, in the 2026 to 2027 tax year. The company pays corporation tax at the 25% main rate.

Interest the company pays
£3,000
Income tax deducted at 20% and paid on form CT61
£600
Paid to you
£2,400
Company’s taxable profit reduced by
£3,000
Corporation tax saved at 25%
£750

Taking the money back

Repayment of the capital you lent is not income, so it carries no tax. The company needs the cash, and the timing matters. If the company is struggling, repaying yourself ahead of other creditors can be undone as a preference. A director is a connected person, so a liquidator or administrator can look back two years before the insolvency, and the court can order you to repay what you took (sections 239 and 240 of the Insolvency Act 1986).

If the company is solvent and repays you on the agreed terms, there is no such risk. Keep the agreement, the board minute and the bank record of each payment.

Your own money has other jobs. A pension contribution the company makes for you can be a deductible expense and builds money outside the company; director pensions covers how. A small self-administered pension scheme can lend to the sponsoring company on strict terms; lending from a pension scheme to your company sets out the rules. Both are regulated advice, given by the firm’s advisers.

Lending to a company you have guaranteed

If you have also given a lender a personal guarantee, your loan to the company and your guarantee are both at stake if it fails. A lender may ask you to subordinate your loan, so you are repaid only after it. Read what a personal guarantee means for a director before you put in more money.

Questions people ask

Can I charge my company interest on a director’s loan?

Yes. The interest is a business expense for the company and income for you. The company deducts income tax at the basic rate of 20% before paying you, and reports and pays it quarterly on form CT61. You declare the interest on your Self Assessment return. From 6 April 2027 the deduction moves to the savings basic rate, announced at 24% for 2027 to 2028.

Is a director’s loan to the company taxable?

The money you lend is not taxed going in or coming back: it is your capital. Interest the company pays on it is taxable income for you and a deductible expense for the company. The company deducts basic rate income tax from yearly interest and pays it to HM Revenue and Customs on form CT61.

Do I need a loan agreement to lend my company money?

The law does not require one, but without it there is no record of the terms. A short written agreement and a board minute should set out the amount, the interest, the repayment terms and whether it is repayable on demand. A lender, a buyer or a liquidator will ask for it.

Can I take my director’s loan back if the company is struggling?

Take advice first. If the company cannot pay its debts, repaying yourself ahead of other creditors can be challenged as a preference, with a look-back period of two years for a director. The court can order you to repay it. Once a company is insolvent, a director must act in the interests of its creditors as a whole.

Should I lend money to my company or buy shares?

A loan can be repaid on its terms, can carry interest, and ranks ahead of shareholders if the company fails. Shares stay in the company and rank last, but they strengthen the balance sheet a lender reads. A company can have both. Look at what the company needs, what a lender will want to see, and what you need back.

What happens if my business cannot repay a loan?

Missed repayments put the loan into default. The lender can demand the whole balance, enforce its security, call on any personal guarantee and, if the company still cannot pay, use insolvency procedures. Talk to the lender before the first missed payment, and take advice from a licensed insolvency practitioner if the company cannot pay its debts as they fall due. The full answer.

Start-up business funding

A new business is funded from the founder’s own money, a government Start Up Loan, asset finance on vehicles and equipment, grants for specific projects and, for a company built to scale, equity from angel investors. Mainstream lenders judge affordability on filed accounts, so the choice of lenders widens once you have a trading record. The full answer.

What do lenders look at for a business loan?

A lender reads the company's bank statements and works out whether its cash covers every loan repayment with room to spare. It then checks the trading history, the Companies House record, the credit files of the company and its directors, and what the money is for. The full answer.

Why was my business loan declined?

A lender declines an application that falls outside its lending criteria: the bank statements, the trading history, the sector, the debt service cover, a credit file or the security on offer. Ask the lender which criterion the application missed, fix what can be fixed, and apply next to a lender whose criteria the business meets. The full answer.

Finance is subject to status and to the lender’s terms. A personal guarantee makes you liable for the company’s debt if it does not repay, and it can be enforced against your own assets, including your home. Nothing here is a personal recommendation.

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Start a funding search

Funding searches run on Swoop’s platform. Swoop Finance Limited is a credit broker and not a lender, and is authorised and regulated by the Financial Conduct Authority (FRN 936513). Buzz Accounting Ltd introduces businesses to Swoop and may receive a fee from Swoop when funding is arranged. Business funding is separate from the financial advice Equity & General Financial Services Limited gives through this website. Finance is subject to status, and a lender may ask a director for a personal guarantee.

Cover for a personal guarantee

If a lender asks you to guarantee the company’s borrowing, our advisers can advise on life cover for that debt.

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