How do I set up and account for directors loans?

Hi @Fusion

If the business is registered as a Sole Trader, then there are no directors. Legally, there’s no separation between the business and it’s sole proprietor. So, instead of having a director’s loan account, you would have a Proprietor’s Drawings Account.

The same theory applies, you could tag any payments made by the sole trader from this ‘bank account’ instead of the current account. Think of the drawings account as their personal account, but only shows business related transactions.

There’s a bit more in the Knowledge Base about this too

[Edit]
I have previously posted this more detailed guide which shows how to account for capital put into the business, and drawings taken out. Although there’s no legal separation, when it comes to the self assessment, there are spaces to account for both of these things.

You can find the more detailed post, here