What about Paying interest to a director? New tax rules come into play from 6 April 2016 where generally an individual can recieve up to £16,000 of interest with no tax if the following apply:

• personal allowance                     £11,000
• savings rate band                          £5,000
• personal savings allowance      £1,000

So a director who is owed money from the company may be in a position to receive interest. As dividends in excess of £5,000 will be taxed at a minimum of 7.5%, the receipt of interest might be an attractive alternative.

A commercial rate of interest should be used and you must be careful that you may have to deduct basic rate tax in certain circumstances.

Another possible way of considering reducing your tax liability is to reduce the amount of dividends you are taking out of the company and then considering using the money left in the company to place into a company pension scheme. You will need to take advice from an independent financial situation who will look at your personal circumstances.

Please do not hesitate to contact me by sending an email to kevin@kwaccounting.com and I would be more than happy to answer any questions you may have.