Definition
A director’s loan account (DLA) is a limited company’s record of money moving between a director and the company other than salary, dividends or repaid expenses. If the director owes the company money, the account is “overdrawn”. If the company owes the director, it is in credit. The year-end balance appears on the company’s balance sheet in its annual accounts.
When an overdrawn account creates tax
- Section 455: if an overdrawn balance is still outstanding 9 months and 1 day after the end of the accounting period, a close company pays section 455 tax. The rate is 35.75% on loans made on or after 6 April 2026 and is repayable once the loan is cleared.
- Benefit in kind: a loan of more than £10,000 is treated as a taxable benefit for the director.
- Write-off: if the company writes the loan off, Class 1 National Insurance is due through payroll and the director pays Income Tax on it through Self Assessment.
When the account is in credit
Money a director puts into the company can be repaid to them tax-free. If the director charges interest, it is deductible for the company and taxable for the director, and the company must withhold 20% Income Tax and report it quarterly on form CT61.
See how director’s loan accounts and s455 tax work for repayment timing.
Related questions
- What do I need to give my accountant for year-end accounts? Bank statements, sales and purchase records, and a note of personal money in or out, so the DLA balance in your year-end accounts is right.
- What are the ways to take money out of a limited company? Salary, dividends, a director's loan and employer pension contributions.
Related terms
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Section 455 tax
Section 455 tax (s455) is a temporary charge, paid like Corporation Tax, on close company loans to participators, usually director-shareholders…
Read definition -
Close company
A close company is, broadly, a UK company controlled by five or fewer shareholders (called participators), or by any number of participators who are also directors.
Read definition -
Unlawful dividend
An unlawful dividend (often called an illegal dividend) is a dividend a limited company pays when it does not have enough profits available for distribution to cover it.
Read definition
