Tax implications of business loans in the UK

Find out what impact business loans have on your tax situation, including if they're tax deductible and whether they count as taxable income.

How business loans impact tax Find out what you can claim
How to get a loan Compare business loans now

If you’re considering taking out a loan for your business, it’s important that you understand how it may affect your tax reporting. Find out if you’ll need to pay tax or even get tax benefits when getting a business loan.

Is a business loan considered taxable income?

No, business loans are not generally considered business income, as it is money that you have borrowed and are paying back as opposed to money that the company has earned.

The one major exception is if some or all of your debt is forgiven by the lender or creditor. The amount that is forgiven would then be considered income for tax purposes.

Are business loans tax deductible in the UK?

While a business loan itself is not tax deductible, you should be able to claim any interest you pay on the loan as a tax deduction, provided the loan is used for business purposes. If the loan is used to cover business and personal expenses, you would only be able to claim the interest on the amount of the loan that was used by business expenses.

Can I get a business loan to pay my VAT or tax bill?

Yes, some lenders offer business finance to help cover your tax bill if your business does not have the capital available. However, if your business finds itself unable to pay its regular tax bills, going into debt may not be advisable.

You could consider invoice financing, or even a business line of credit, to cover your tax payments if your business has irregular cash flow.

Business loans can be an important source of funds for growing your business, but you should always check with your accountant to confirm the tax implications of taking out a loan.”

Chris Lilly, Finder money expert

Director’s loans

Just like a normal business loan, if you lend money to your own business through a director’s loan, the company does not have to pay tax on the loan. Any interest you charge would be considered a business expense and therefore could be claimed as a tax deduction for your company.

However, you will need to declare any interest you receive on the loan as personal income, which means you will have to report it when you complete your tax return.

Bottom line

In most situations, business loans are not considered taxable income, and any interest you pay on the loan can be claimed as a tax deduction. However, before taking out a business loan, it’s always worth talking to an accountant or financial adviser to make sure you’re aware of any potential tax implications.

Compare business loans

Table: sorted by representative APR
1 - 12 of 12
Name Product Loan amounts Loan terms Representative APR
Tide Start-up Loan
£500 to £100,000
12 to 60 months
6% APR representative (fixed).
Tide Credit Line
Minimum loan of £1,000
Up to 6 months
26.6% APR representative based on an assumed unsecured loan amount of £20,000, with a monthly subscription fee of £100 and an annual interest rate of 12% (fixed). This would be 6 monthly repayments of £3,550.97, including the subscription fee.Total amount payable within 6 months would be £21,405.80 (including subscription fee).
Barclays Secured and Unsecured Business Loans
£1,000 to £5,000,000
12 to 240 months
Subject to application, financial circumstances and borrowing history. Other terms may be available.
Nest Unsecured Business Loan
£10,000 to £5,000,000
6 to 120 months
The representative rate is 6.25% APR (fixed). If you borrow £100,000 over 60 months you will repay £116,701.17 in total.
mycashline Small Business Loans
£5,000 to £100,000
1 to 24 months
Borrow £10,000 over 12 months at a rate of 51.45% p.a. (fixed) with an arrangement fee of 3%. Representative APR 54.45% and total payable £13,600.00. 12 monthly repayments of £1133.33.
Love Finance business loan
£5,000 to £250,000
3 to 60 months
Representative example: Borrow £25,000 over 5 years at a rate of 19.40% p.a. (fixed). Representative APR 19.40% and total payable £ 38,395.20 in monthly repayments of £639.92.
Cubefunder Flexible Business Loans
£5,000 to £100,000
3 to 12 months
Fixed cost of credit.
NatWest Fixed Rate Small Business Loan
£25,000 to £10,000,000
12 to 300 months
Borrow £10,000 over 5 years at a rate of 11.7% pa (fixed). Representative APR 12.35% and total payable £13,255.89 in monthly repayments of £220.93 Other amounts available at alternative rates. Rates depend on your circumstances and loan amount and may differ from the Representative APR. Subject to status, business use only.
iwoca Flexi-Loan
£1,000 to £500,000 *start-ups up to £10,000
1 to 24 months
Representative example: Borrow £10,000 over 12 months at a rate of 40% p.a. (variable). Representative APR 49% and total payable £12,294.
Lombard Business Finance
£5,000 to £250,000
12 to 84 months
HSBC Fixed Rate Small Business Loan
£1,000 to £25,000
12 to 120 months
Representative example: Borrow £13,000 over 5 years at a rate of 7.1% p.a. (fixed). Representative APR 7.1% and total payable £15,404.01 in monthly repayments of £256.73.
Funding Circle Unsecured Business Loan
£10,000 to £500,000
24 to 72 months
We show offers we can track - that's not every product on the market...yet. Unless we've said otherwise, products are in no particular order. The terms "best", "top", "cheap" (and variations of these) aren't ratings, though we always explain what's great about a product when we highlight it. This is subject to our terms of use. When you make major financial decisions, consider getting independent financial advice. Always consider your own circumstances when you compare products so you get what's right for you.

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