Repayment of a shareholder loan
If a Jersey resident individual shareholder of a Jersey resident company, or a member of that shareholder's family or household, receives a loan from that company then, subject to some limited exceptions (see Article 81O of Income Tax (Jersey) Law 1961 for details), the shareholder will be assessable to tax on the value of that loan.
Less commonly, a shareholder will also be assessable if the company agrees to pay a debt due by the shareholder (or a member of his or her family or household) to a third party. In this case, the assessable amount is the value of the debt that has been assigned to the company.
When that loan is repaid by the shareholder to the company, either in whole or in part, in a year after the year when the loan was originally made, the shareholder may be able to claim a credit against their tax liability for the year the payment is made.
This tax credit is calculated using the appropriate tax effective rate. A tax effective rate is the percentage of tax you pay on each £1 of income charged to tax.
How to calculate a tax credit attributable to a shareholder loan
This is an example of how to calculate a tax effective rate for the purpose of determining a shareholder loan tax credit (based on 2025 allowances etc.):
Salary
| £25,000 | Total income | £55,000 |
Shareholder loan
| £30,000
| | |
| | | Less: exemption threshold
| £20,700 |
Total income
| £55,000 | Taxable income
| £34,300
|
Income tax at 20%
| £11,000
| Tax calculation at 26%
| £8,918
|
Utilisation of a shareholder loan tax credit
Following on from the above example, assuming the individual concerned earns £60,000 in 2026 and uses £30,000 of that money to repay all of the shareholder loan they took out in the previous year, the shareholder's tax position can be summarised as follows:
| Salary | £60,000 | Total income | £60,000 |
| | | Less: exemption threshold | £21,250 |
| Total income | £60,000 | Taxable income | £38,750 |
| Income tax at 20% | £12,000 | Tax calculation at 26% | £10,075 |
| | | | |
| Income tax liability for 2026 | | | £10,075 |
Less: tax credit for shareholder loan repaid £30,000 x 16.21% | | | (£4,863) |
| Tax payable | | | £5,212 |
If, instead of repaying all of the loan in 2026, the shareholder only repays £14,000 of the loan, the tax payable would now be calculated as follows:
| Income tax liability for 2026 (as above example) | £10,075
|
Less: tax credit for shareholder loan repaid £14,000 x 16.21% | (£2,269) |
| Tax payable | £7,806 |
If the individual earns £30,000 in 2026 and repays £15,000 of the shareholder loan, the shareholder's tax position would now be as follows:
| Salary | £30,000 | Total income | £30,000 |
| | | Less: exemption threshold | £21,250 |
| Total income | £30,000 | Taxable income | £8,750 |
| Income tax at 20% | £6,000 | Tax calculation at 26% | £2,275 |
| | | | |
| Income tax liability for 2026 | | | £2,275 |
Less: tax credit for shareholder loan repaid Maximum £15,000 x 16.21% = £2,432 but restricted to: | | | (£2,275) |
| Tax payable | | | £nil |
gov.je