A director’s loan is money you take out of your company that is not salary, dividend or expense repayment — and not money you previously put in. The running record of what you owe the company, or it owes you, is the director’s loan account.
Most directors have one whether they meant to or not — a personal cost on the company card, a drawing taken before profit was confirmed, a dividend voted without the profits to support it.
The expensive part is section 455 of the Corporation Tax Act 2010, and the rate went up on 6 April 2026.
The section 455 charge
If the loan account is overdrawn — you owe the company — and the balance is not cleared within nine months of the accounting period end, the company pays Corporation Tax on the outstanding amount. The charge is pegged to the dividend upper rate, so it moved when dividend rates moved:
- 35.75% for loans made, or benefits conferred, on or after 6 April 2026
- 33.75% for loans made between 6 April 2022 and 5 April 2026
Which rate applies is fixed by when the loan was made, not by when the nine-month deadline falls. A loan made in March 2026 and still outstanding in 2028 is charged at 33.75%; one made in May 2026 is charged at 35.75%. If a loan account has movements either side of 6 April 2026, the two blocks are charged at different rates.
⚠️ GOV.UK’s own /directors-loans page and its CT600A completion guidance both still show 33.75% only. Neither has been updated for the April 2026 change. The Finance Act governs, not the guidance page.
⚠️ The bigger practical problem is not the guidance but the filing. HMRC has said the Corporation Tax online service will not be updated for the 35.75% rate until 6 April 2027. A return filed before that date covering loans made on or after 6 April 2026 may therefore need amending once the service catches up. Budget for the higher rate now rather than the figure the service produces, and diarise the amendment.
Worked example
Company with a 31 March year end. The director draws £30,000 in June 2026 and the balance is still outstanding at the year end.
| Loan outstanding at 31 March 2027 | £30,000 |
| Loan made | June 2026 — on or after 6 April 2026 |
| Rate | 35.75% |
| Section 455 charge | £10,725 |
| Due date (nine months and one day) | 1 January 2028 |
The same loan made in March 2026 would have been charged at 33.75% — £10,125. The two-point rise costs £600 on a £30,000 balance.
The charge is reported on supplementary page CT600A and is payable on the ordinary Corporation Tax date: nine months and one day after the end of the accounting period. That is three months before the CT600 filing deadline, which catches people out.
Getting the money back
The section 455 charge is a deposit, not a permanent cost. The company can reclaim it once the loan is repaid, written off or released. Three conditions govern the claim:
- You cannot claim until relief is due — nine months and one day after the end of the accounting period in which the loan was repaid, written off or released. HMRC will not repay before then.
- You must claim within four years.
- Interest charged in the meantime is not reclaimable. Only the tax comes back.
Claiming within two years of the end of the accounting period in which the loan was taken out, use form CT600A with the Company Tax Return. Two years or more after that, use form L2P.
The split is not quite that clean. Even inside the two years you must use L2P if the return you are filing is for a different accounting period from the one the loan was made in, or if you are amending a return in writing rather than through the online service.
The four-year limit bites. A loan repaid in 2027 and forgotten about is worth nothing by 2032.
The 30-day rule stops the obvious workaround
The obvious move — repay just before the nine-month deadline and take it out again a fortnight later — does not work. If the loan was more than £5,000 and another loan of £5,000 or more is taken within 30 days before or after the repayment, the repayment is matched against the new loan rather than the old one, and the charge stands on the original.
There is a backstop outside 30 days. Where at least £15,000 was outstanding before a repayment and arrangements had been made for at least £5,000 of new loans, the same applies. HMRC reads “arrangements” widely, with no time limit.
The £10,000 benefit in kind threshold
Section 455 aside, there is a personal charge. If you are a shareholder and director and you owe your company more than £10,000 at any point in the tax year, the company must treat the loan as a benefit in kind. It is reported on a P11D, and the National Insurance on it is Class 1A payable by the company through the P11D(b) — an employer cost, not a deduction from your pay. You report the loan on a personal Self Assessment return, and may have tax to pay at HMRC’s official rate of interest.
The official rate of interest is 3.75% from 6 April 2026, unchanged from 2025/26. Since Autumn Budget 2024 it is reviewed quarterly rather than annually, so check it before calculating a part-year benefit.
On the £30,000 loan above, an interest-free year produces:
- Taxable benefit: £30,000 × 3.75% = £1,125
- Income tax for a higher-rate director at 40%: £450
- Class 1A National Insurance at 15% on the benefit, paid by the company: £168.75
Charging interest below the official rate has the same effect. The company records the interest you pay as income, and the discount — the gap between the official rate and what you paid — is a benefit in kind reportable on your Self Assessment return.
Charging interest at or above the official rate removes the benefit in kind entirely. It does not remove the section 455 charge, which turns on the loan itself.
If the loan is written off instead of repaid
Writing off a loan settles the balance but creates two charges:
- You pay Income Tax on the amount through a Self Assessment tax return.
- The company accounts for Class 1 National Insurance through payroll — not Class 1A. A written-off loan is treated as earnings, so it runs through the payroll like pay, which is a different regime from the £10,000 benefit in kind above and its Class 1A charge on a P11D.
The company can then reclaim the section 455 tax on the same timetable as a repayment. The same applies if the loan is released or the company goes into liquidation.
A write-off is not a costless exit. It converts a Corporation Tax deposit into a personal Income Tax bill plus National Insurance.
When the company owes you
A loan account in credit is much simpler. Your company does not pay Corporation Tax on money you lend it, and you can draw it back at any time with no tax consequence.
Charging the company interest is more involved. It is a deductible expense for the company and taxable income for you, but the company must pay it less Income Tax at the basic rate of 20% and report that tax quarterly on form CT61. Most owner-managed companies do not charge interest, for exactly that reason.
Frequently asked questions
What is the section 455 tax rate for 2026/27?
35.75% for loans made, or benefits conferred, on or after 6 April 2026, and 33.75% for loans made between 6 April 2022 and 5 April 2026. Which rate applies is fixed by when the loan was made, not by when the nine-month deadline falls.
When is the section 455 charge due?
Nine months and one day after the end of the Corporation Tax accounting period, if the loan is still outstanding at that point. It is reported on supplementary page CT600A. Note that this is three months before the CT600 filing deadline.
Can I get the section 455 tax back?
Yes, once the loan is repaid, written off or released. You cannot claim until nine months and one day after the end of the accounting period in which that happened, and you must claim within four years. Interest charged in the meantime is not reclaimable.
Do I pay personal tax on a director’s loan?
If you owe the company more than £10,000 at any point in the tax year, the loan is a benefit in kind. The company reports it on a P11D and pays Class 1A National Insurance on it through the P11D(b) — an employer cost, not a deduction from your pay — and you report it on a Self Assessment return, with tax charged by reference to HMRC’s official rate of interest, 3.75% from 6 April 2026. The same applies to the discount if you pay interest below the official rate. Class 1 National Insurance is different: that applies where a loan is written off rather than repaid, because a write-off is treated as earnings and goes through payroll.
Can I repay the loan and take it out again?
Not effectively. If the loan was more than £5,000 and you take another loan of £5,000 or more within 30 days before or after the repayment, the repayment is matched to the new loan and the original charge stands. A wider rule applies where at least £15,000 was outstanding and arrangements had been made for further borrowing.
Keeping the loan account under control
Almost every overdrawn loan account starts as a bookkeeping problem rather than deliberate borrowing — personal costs on the company card, drawings ahead of profit, dividends voted without paperwork. It is cheaper to keep salary and dividends clean each month than to unpick a balance nine months after the year end.
SmartFiling runs RTI payroll from £15 per employee per month, including auto-enrolment, payslips, P60s and year-end returns, so the salary side of your drawings is documented properly every month. Fixed fee, fully online, reviewed by an ICAEW Chartered Accountant.
