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What is an Owner's Loan

Find out more about Owner's Loans and how they work

What is an owner loan?

An owner loan is money that a director or shareholder lends to their company, often to fund the purchase of a property or cover early-stage costs. It is a formal liability on the company’s balance sheet and must be documented correctly.

How is the Owner’s Loan amount set?

he Owner's Loan is set at the property purchase price (in relative proportion to your shareholding) as standard when your company is set up. For example, if a shareholder owns 50% of the company’s shares, the total amount of that shareholder’s Owner’s Loan will be 50% of the total purchase price of the property.

The apportionment of any repayments is up to the shareholders of the company and it is not dealt with in the standard loan agreement.

The loan itself is only for an amount up to the purchase price; therefore, it does not matter if the shareholder loans are less or more overall. When we prepare the year-end accounts, we will review how much was actually lent to the company and account for this in the annual account.
 

Can the loan have interest?

Yes. You can choose to charge interest on the loan. However:

  • If interest is charged, GetGround must file a CT61 form to report the tax on interest paid.

  • Additional annual fee: £200 + VAT

How can I repay the owner loan?

The loan can be repaid in full or in instalments, subject to available company funds. There are no tax implications for repaying the principal, but interest payments must be properly reported and taxed.