A director loan account records money moving between a company and its director that is not salary, dividend or expense reimbursement. It is one of the areas where messy bookkeeping can quickly create confusion.
What a director loan account is
The account tracks what the director owes the company or what the company owes the director. It is not the same as payroll or dividends.
- Personal spending paid by the company
- Money the director lends to the company
- Company payments made on the director’s behalf
Why it matters
Director loan balances can affect tax, year-end accounts and how much money can safely be taken from the company.
- Overdrawn loan accounts need attention
- Accountants need accurate records
- Poor records can hide personal spending
Common bookkeeping problems
Problems often start when directors use the company card casually or transfer money without explaining what it is for.
- Unlabelled bank transfers
- Personal costs in company expenses
- Dividends recorded without profit checks
How to keep it tidy
The key is to label transactions clearly and review the loan account regularly, not only at year end.
- Add notes to transfers
- Keep receipts for reimbursed expenses
- Review the balance monthly
When to ask for advice
If a director loan account is overdrawn or unclear, speak to an accountant before taking further money from the company.
- Check tax consequences
- Agree repayment plans if needed
- Avoid guessing at year end
Key takeaway
A director loan account is manageable when every director payment has a clear explanation.
