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Loans, Cash Advances and Credit Card Payments

You may decide at some point to further invest in your business, either by purchasing more stock, a new franchise to expand your business, or even for day to day working capital.

Loans or Cash Advances (e.g. PayPal Working Capital, iZettle Advance)

Where these are used for business purposes, you will need to log the information on your tax return.

  • Income: This is the amount which you receive, it should be logged as an income on your accounts
  • Expenses: The overall amount which you pay back, including any charges or interest

Credit Cards (e.g. Business Credit Cards, CapitalOnTap, etc)

Private credit cards can become more complex, and we’d recommend having a separate business credit facility, as it can be difficult to define the difference in personal/business transactions, and for interest or charging purposes.

Expenses: The amount you pay out to the credit facility for transactions, and any charges or interest

Example

Carol takes a working capital loan for £1,000, at a rate of 12%. The loan is repayable over 12 months. The monthly repayments are £88.56.

The £1,000 is classed as an income

The repayments of £88.56 are classed as expenses, therefore would be £1062.74 over a 12 month (calendar) period.

In the example above, where the loan is taken out mid-year, such as in August, the income would be logged on the current tax year for when the payment is received, and then the expenses would be taken against each appropriate month when paid.

As such, it may be that the repayments are over more than one financial year.

Updated on May 21, 2021

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