What if you pay personal costs on the business card?

If you buy personal things using your business card, you could be setting yourself up for an expensive tax bill.

Here's why:

What happens to personal spending on the business card?

If you pay for something you know is personal using your business bank card, it gets disallowed and put against your director's loan account. That then needs clearing, either by repaying it, taking it as extra salary, or taking it as extra dividends.

HMRC's guidance defines a director's loan as money you get from your company that is not a salary, dividend or expense repayment, and not money you have previously paid in. Its National Insurance Manual lists payment by the company of personal expenditure among the entries that appear on a director's loan account, and its worked example includes a line for personal expenses on the company credit card.

How much tax does clearing the balance cost?

Say you're already paying yourself £50k a year (£12.5k salary, the rest as dividends). If you've spent an extra £30k on personal things through the business, and you don't have the cash sitting there to repay it, that £30k needs to come out as extra salary or dividends.

Taxed as dividends at the higher rate (35.75%), that's roughly £10,725 in tax on the £30k alone.

HMRC's guidance confirms 35.75% as the rate on dividends in the higher rate band for 2026 to 2027, and says that to work out your band you add your total dividend income to your other income. The higher rate band starts at £50,271.

Why can the tax bill keep growing?

To pay that tax bill, you'll likely need to borrow from the company again, which lands right back on your director's loan account, which then needs clearing too, usually by taking even more dividends, which come with their own tax bill.

Before you know it, you're in a cycle of pulling more and more out of the business just to cover tax on money you've already spent.

There is a limit on the dividend route as well. HMRC's guidance says a company must not pay out more in dividends than its available profits from current and previous financial years.

What if the balance is left on the loan account?

Leaving it there has its own cost. HMRC's guidance says that 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. If the loan is not repaid within 9 months of the end of the Corporation Tax accounting period, the company pays Corporation Tax on the outstanding amount. HMRC's Company Taxation Manual gives that rate as 35.75% for loans made on or after 6 April 2026.

HMRC can also look at what the payments really were. Its manual says it is always a question of fact, based on all the evidence, whether a withdrawal is a loan, earnings or a payment on account of earnings, and that the same reasoning applies to personal expenses paid by a company credit card.

How do you keep personal spending out of the company?

The fix is simple: know exactly what's going through your business card every month, and keep personal spending on a personal card.

That matches what HMRC expects of a company. Its guidance says there must be a clear division between the company's finances and those of the owners and directors, because the company is a separate legal entity, and that the company's banking must be separate from your personal banking.

For how HMRC approaches these costs in an enquiry, see personal costs through the business. For setting drawings at a level that covers what you spend, see how much a founder should pay themselves.

Rates and the rules on directors' loans change, and the tax due depends on your own income and your company's position, so this is general information rather than advice on your own loan account. If you want yours reviewed, see how we work or talk to us.