If a director lends money to their own company, it should be documented in a formal loan agreement. HMRC scrutinises director loan accounts — a written agreement protects the director's position as a creditor and can evidence that the money is a loan (not an equity contribution).

• Director lending to company: interest payments to director are subject to income tax
• Company paying interest must deduct 20% basic rate tax at source (unless HMRC exempts)
• No interest: HMRC may still impute a market rate in certain circumstances
• Director loan account must be recorded in statutory accounts
• If company is insolvent, director loan ranks as unsecured debt unless secured

Legal reference: Companies Act 2006 Part 10; Income Tax Act 2007; Corporation Tax Act 2010 s.455