Directors' loan accounts

What goes through it

GOV.UK defines a director's loan as money a director or a close family member gets from the company that is not a salary, dividend or repayment of expenses, and says the company must keep a record of money borrowed from or paid into the company, usually called a director's loan account (GOV.UK: director's loans). Any balance owed to or by the director at the year end goes on the balance sheet.

Debits to the account include personal bills paid by the company, cash withdrawn, and personal spending on a company card. Credits include money the director lends to the company, company expenses the director paid personally, and salary or dividends declared but not yet paid out. Each director has a separate account.

Key figures for 2026 to 2027

Section 455 tax on loans made from 6 April 2026

35.75% of the outstanding loan (HMRC CTM61505)

Section 455 tax on loans made 6 April 2022 to 5 April 2026

33.75% (HMRC CTM61505)

When section 455 tax is due

9 months and 1 day after the end of the accounting period (CTA 2010 s455)

Beneficial loan threshold

£10,000 outstanding at any time in the tax year (ITEPA 2003 s180)

Official rate of interest from 6 April 2026

3.75% (GOV.UK: HMRC official rates)

Overdrawn accounts and section 455

When a close company lends to a participator, such as a director who is also a shareholder, tax is due from the company at a rate equal to the dividend upper rate for the tax year in which the loan is made, payable 9 months and 1 day after the end of the accounting period (Corporation Tax Act 2010 s455). HMRC's technical note confirmed the dividend upper rate rose to 35.75% from 6 April 2026 and the loans to participators rate rose with it (GOV.UK: change to tax rates technical note). The GOV.UK director's loans page still showed 33.75% on 2 October 2026, which applies to loans made before 6 April 2026.

If the loan is repaid within 9 months of the end of the accounting period, no section 455 tax is due on the amount repaid. The outstanding amount is reported on the supplementary page CT600A (GOV.UK: if you owe your company money). Section 455 tax paid is reclaimed once the loan is repaid, written off or released, but the interest charged on late tax is not refunded. The claim is made within 4 years: on the CT600A within 2 years, or on form L2P after that (GOV.UK). See close companies and s455.

Section 455, worked

For example, a company with a 31 December 2026 year end has an overdrawn directors' loan account of £18,000 at that date, all lent during 2026. If the director repays £8,000 by 30 September 2027, section 455 tax is due on the remaining £10,000. At 35.75% (HMRC CTM61505) that is £3,575, payable by 1 October 2027.

Benefit in kind on beneficial loans

Where loans to an employee or director total more than £10,000 at any time in the tax year, a cheap or interest-free loan is a taxable benefit (Income Tax (Earnings and Pensions) Act 2003 s180). The benefit is the difference between interest at the official rate and any interest the director pays, and the company pays Class 1A National Insurance on it (HMRC NIM16671).

The official rate is 3.75% from 6 April 2026 (GOV.UK: HMRC official rates). Since 6 April 2025 HMRC may change the rate during a tax year, so check it for each year being reported (HMRC EIM26104). The benefit is reported on the director's P11D. See P11D and Class 1A.

If a loan is written off or released, GOV.UK says the company deducts Class 1 National Insurance through payroll and the director reports the amount on their Self Assessment return (GOV.UK: if you owe your company money).

Keeping the account in order

• Post every personal item as it happens, from bank lines, card statements and expense claims.
• Agree the balance with each director at the year end and keep their confirmation on file.
• Record dividends only when declared, with board minutes, and credit the loan account only when the dividend has been declared and is unpaid.
• Watch the balance through the year against the £10,000 beneficial loan threshold (ITEPA 2003 s180), and the year end against section 455.
• Use a separate account for each director, and for connected people who borrow from the company.

Disclosure in the accounts

A company's accounts must give details of advances and credits granted to its directors: the amount, an indication of the interest rate, the main conditions, and amounts repaid, written off or waived (Companies Act 2006 s413). See the directors' advances note.