Budget 2016: Companies need to consider costly implications of changes to tax on loans

Budget 2016: Implications of changes to tax on loans

Dermot Callinan, Head of Private Client, comments on the changes to tax on loans to business owners.

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Commenting on the changes to tax on loans to business owners Dermot Callinan, head of Private Client, commented:

“Historically private companies could make a loan to a shareholder in preference to a dividend, which can under current tax rules be advantageous as the tax rate on such a loan is 25%, whilst a dividend could be taxed up to 38.1%.

“Today’s announcement by the Chancellor changes the company loan rate to 32.5% which brings the rate in line with the tax a higher rate taxpayer would pay on a dividend.

“In future company owners will have to consider the costly implications to making a loan to their shareholders rather than a dividend.”


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