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HMRC states that you have to report on a P11D and pay Class 1A National Insurance on the value of any benefit when a 'beneficial loan' is made to an employee.

https://www.gov.uk/expenses-and-benefits-loans-provided-to-employees/what-to-report-and-pay

But my understanding is that it is not considered a 'Beneficial loan' when the loan is repaid in full on time, with the the required interest (currently 2.5%).

Is it correct that there will be no NI requirement for an employee loan when no interest benefit is derived, correct timelines are adhered to, and the correct paperwork for the loan agreement is generated.? Any other gotcha's..?

Extra: The loan will be made to a director in the business and repaid before 9 months after the company tax year-end.

  • Of course, I will seek the professional advice of my accountant on this. Just want to do my homework beforehand.. – Dave Sumter Jul 3 '18 at 13:36
  • This has much better info gov.uk/directors-loans/you-owe-your-company-money. My gut says you will not need to pay NI, but I am not going to go through the documentations to figure it out. Another query why not declare an early dividend ? Or make your partner a shareholder and pay him(her) a dividend. – DumbCoder Jul 3 '18 at 16:43
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    Two things to remember: If the company goes bankrupt, director loans must be paid back in full to satisfy creditors. And if a director loan isn't paid back, HMRC will tend to assume that it wasn't a loan, but salary, with all the consequences. – gnasher729 Jul 3 '18 at 21:54

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