Can you use a director's loan to buy something personal?

"Can I put a piano through my business?"

A client asked me this the other day, and at first glance, the answer looks like a straightforward no.

Can you claim a personal purchase as a business expense?

She's not in the music industry, and there's no direct, wholly and exclusively business purpose for buying a piano. So as a business expense claiming tax relief, it doesn't work.

HMRC's Business Income Manual explains the test. Expenditure can only be deducted if it is incurred wholly and exclusively for the purposes of the trade, and the rule is only satisfied if that is the sole purpose of the expense. If a non-trade purpose is identified, the expenditure is not allowable.

But that's not the end of the conversation. There are still a couple of routes worth knowing about:

Can the company give it to you as a trivial benefit?

The company can gift you up to £300 a year tax free, made up of individual gifts of £50 or less. A few conditions apply though: it can't be cash or a cash voucher, it can't be a reward for work, and it can't be something you're contractually entitled to.

HMRC's guidance sets out the same conditions, and the £300 limit is the one that applies to directors of close companies, which it describes as limited companies run by 5 or fewer shareholders. There is more on how the exemption works in trivial benefits for staff and directors.

Can the company lend you the money instead?

The company lends you the money to buy it personally, and you repay it over time. There's no tax relief on the purchase itself, but it's a way to access company funds without it hitting your personal bank account as salary or dividends first.

HMRC's guidance calls this a director's loan: money you get from the company that is not a salary, dividend or expense repayment, and not money you have previously paid in. You must keep a record of it, and any amount you owe the company at the end of its financial year goes on the balance sheet in the annual accounts.

What are the tax rules on a director's loan?

Just be careful with the rules: go over £10,000 outstanding at any point in the tax year and it can become a taxable benefit unless you're charged interest at HMRC's official rate (currently 3.75%). And if the loan isn't repaid within 9 months and 1 day of your company's year end, the company faces a 35.75% tax charge on the outstanding balance, which is only refundable once the loan is repaid.

Each part of that is in HMRC's published guidance:

• The official rate of interest is 3.75% from 6 April 2026, the same as for 2025 to 2026.
• If you owe your company more than £10,000 at any time in the year, the company must treat the loan as a benefit in kind and you must report it on a Self Assessment tax return.
• The Company Taxation Manual gives the rate of the charge as 35.75% for loans made on or after 6 April 2026. For loans made from 6 April 2022 up to that date it was 33.75%.
• HMRC's guidance on the CT600A form gives relief where the loan was repaid earlier than 9 months and one day after the end of the accounting period in which it was made.
• The company can reclaim the charge after the loan is repaid, but not any interest paid on it. The repayment is not made until 9 months and 1 day after the end of the accounting period in which the loan was repaid.

Repaying a loan and then borrowing again does not reset the position. HMRC's guidance covers the case where a loan of more than £5,000 is repaid and another loan of £5,000 or more is taken within 30 days before or after, and says the company pays the charge on the original loan.

Does this only apply to a piano?

This doesn't just apply to a piano. It applies to plenty of things that aren't a direct business expense on the face of it, but unless you actually have the conversation with your accountant, you'd never know what's possible, or what the rules actually are.

For how HMRC looks at personal costs that have gone through a company, see personal costs through the business.

The official rate, the loan threshold and the rate of the charge all change from time to time, and the right route depends on your own company, so this is general information rather than advice on your purchase. If you want to check a specific item before you buy it, talk to us.