It’s the time of year when I see a lot of company and personal taxes interlink. This interaction can have both positive and negative results for the client. Sorting out a company tax issue can lead to a tax liability for the owner. It’s not all negative, though, as you’ll see how a bonus in 2026 for 2025 can be very beneficial for the shareholder. Getting the mix right protects the client if Revenue come calling. Let’s look at
- Director’s loan
- Bonus Payment
- Summary
Director’s Loan
When doing a corporation tax review for a client, one of the first things I look at is whether there is a director’s loan. If there is, apart from my heart sinking a little bit, I know there’s a bit of work to sort this out. Such was the case for Mandy Lorian and her company Drogu Ltd. Looking at the first draft of her 2025 accounts, some notable figures are
| Profit before taxes | €30,000 |
| Director’s salary | €16,500 |
| Director’s loan | €10,000 |
Company Taxes
Before making any adjustments, the corporation tax liability for the company would be
| Corporation Tax €30,000 x 12.5% | €3,750 |
| Income Tax on loan €10,000 x 25% | €2,500 |
| Total Liability | €6,250 |
While the Income tax on the loan forms part of the corporation tax liability, you can get the money back. You get this back when you repay the loan and must claim the refund in a corporation tax return. But there is a rule that if you repay the loan before the Corporation Tax return filing date, you don’t pay the tax. The CT filing date for Drogu Ltd is the 21st of September 2026.
Bonus Payment
A bonus payment for Mandy for 2025 makes sense. If we can sort the bonus payment within 6 months of the accounting year end, it can go into the 2025 accounts. The benefit of that is there’s an immediate corporation tax saving. Mandy is looking to get a mortgage, and with the best will in the world, numbers matter. Her salary of €16,500 won’t get her what she needs. We decide to declare a bonus of €27,500 for 2025 and put that in her May 2026 pay run along with her normal monthly pay.
This results in a PAYE liability of €9,000, which Mandy pays earlier this month.
The impact of the bonus payment is threefold:
- Deduction for corporation tax for 2025
- Increase in her 2025 income, and
- Solution to the Income Tax on the director’s loan
Corporation Tax deduction
The 2025 company profits are reduced by €27,500, so the company gets a corporation tax deduction for the bonus.
| CT on profit of €30,000 x 12.5% | €3,750 |
| CT on profit of €2,500 x 12.5% | €313 |
| CT Saving | €3,437 |
Increase in her 2025 Income
There’s an increase in her 2025 income by the amount of the bonus. Her salary for 2025 goes from €16,500 to €44,000. The most a single person can earn at the lower rate band for 2025 is €44,000. For owner-directors, bonuses paid in 2026 that relate to 2025 must be included as 2025 earnings. There are specific sections on the Income Tax return Form 11s for this.
While the bonus is part of Mandy’s 2025 earnings, she gets a credit for the extra tax of €9,000 paid on that bonus. That extra tax went through in May 2026, and some of it was at the higher rate. Given Mandy will only pay tax at the lower rate in 2025, she should be in a tax refund position.
This is what transpires. Mandy is due a tax refund of €2,520 in 2025. We won’t file her return until the May 2026 PAYE goes to Revenue. The reason is that owner-directors don’t get a credit for the PAYE until it is actually paid.
Income Tax on Director’s loan
Paying the bonus sorts the Income Tax on the director’s loan issue. After paying the bonus, Mandy’s net position is
| Bonus | €27,500 |
| Taxes | €9,000 |
| Net after taxes | €18,500 |
Mandy takes €8,500 and leaves €10,000 in the company to clear the loan. As a result, the company won’t pay Income Tax of €2,500 as part of its 2025 corporation tax liability.
Savings
While the company has paid €9,000 in PAYE on the bonus, this has been offset by savings of
| Corporation Tax | €3,437 |
| Tax refund for Mandy | €2,520 |
| Income Tax on company loan | €2,500 |
| Total savings | €8’457 |
One of the main positives for Mandy is that her 2025 earnings go from €16,500 to €44,000. This will be in her 2025 tax return and her self-assessment letter for last year. All mortgage lenders will look for this documentation. The other big positives for her are that she gets the Income Tax refund of €2,520. So, she has that, and the extra €8,500 from the bonus to boost her savings for the mortgage. She has sorted the company loan, and this will save on BIK too.
Don’t forget
Don’t forget the BIK on the loan balance for her income tax return. While the loan was repaid with the bonus after the year-end, the loan was there at the end of 2025. As a result, there is BIK owed on that loan. Unless the loan was in relation to the purchase or repair of her home, the BIK rate is 13.5%. So, the BIK will be
| €10,000 x 13.5% | €1,350 |
That figure goes into her 2025 tax return and will increase her income from €44,000 to €45,350. She’ll pay higher rate tax on the BIK, and it will reduce her tax refund by a small amount
If we roll forward into 2026, she has the €10,000 loan until the end of May. Her BIK for her 2026 tax return will only be for 5 months
| €10,000 x 13.5% x 5/12 | €563 |
Summary
The above is a great example of how company and personal taxes interlink. The bonus payment in 2026 for Mandy worked out well for her and her company. The fact that she could earn more at the lower rate in 2025 was a big help. Also, she had money in the company to fix the problem.
Our goal every year is to get 90% of our company clients who have December year-ends sorted by the end of June. That helps us avoid the mad September deadline rush. This benefits us but also helps the client. Having 2025 accounts done early in 2026 enables us to provide solutions to help clients. It gives us more time and headspace to look at bonuses, dividends, and tax payments, etc to help and protect clients. After all, that’s what they are paying us for.
One thing we are passionate about is helping clients get mortgages. A few of us have been through the mortgage application process recently. It gives us huge satisfaction to help clients any way we can. Getting the accounts and tax returns done early ensures your paperwork is in order when applying.
Do you want to make sure your company is as tax efficient as possible? If so, start here
