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Why a loan is not taxable income
When your company receives a business loan, it has not earned anything — it has taken on a debt it must repay. In the accounts, the money comes in as cash on one side and a matching liability (the loan) on the other. It does not pass through the profit and loss account as income or turnover, so it does not increase your taxable profit and is not subject to corporation tax. This is the same principle whether the facility is a lump-sum loan or a revolving credit line.
This is general information, not tax or accounting advice. Confirm the treatment for your company with your accountant.
How repayments, interest and fees are treated
The treatment splits between principal and cost. Repaying the principal is simply returning borrowed money, so those repayments are not a tax-deductible expense. The interest and arrangement or facility fees, however, are generally an allowable business expense that reduces taxable profit, provided the borrowing is for genuine business purposes. The practical upshot: receiving the loan is tax-neutral, repaying the principal is tax-neutral, and the cost of borrowing is usually deductible.
How Credicorp finance fits
A Credicorp business loan or business credit facility is lent to the limited company with no personal guarantee, sits as a liability on the company balance sheet, and is not taxable income. Your accountant will record the interest and fees as a business expense in the usual way. You can apply online as a company.
Frequently asked questions
Do I pay corporation tax on money I borrow?
No. Borrowed money is a liability, not income, so it does not form part of taxable profit. You only ever pay corporation tax on profit you actually earn.
Can I deduct the loan repayments from my company's tax?
Repayments of the principal are not deductible (you are returning borrowed money), but the interest and fees on business borrowing are generally an allowable expense. Confirm the treatment with your accountant.
Funding for UK limited companies
Credicorp lends to your company, not to you personally — short-term working capital with no personal guarantee. See what your business could access.