How it works, step by step
- Money out. If you take more than you put in, plus salary and dividends due, the account is overdrawn and you owe the company.
- The 9 month rule. Repay the overdrawn balance within 9 months and 1 day of the year end and there is no corporation tax charge.
- The s455 charge. If it is not repaid in time, the company pays 33.75% of the outstanding balance, refundable once you eventually repay.
- The £10,000 rule. A loan of more than £10,000 at any point is treated as a benefit in kind, with tax and reporting unless you pay interest at the official rate.
How to stay on the right side of it
Keep the account accurate, avoid dipping into company funds casually, and clear any overdrawn balance before the deadline, often by voting a dividend or bonus if profits allow. Planned properly, the loan account is a useful tool rather than a tax trap.
Loan account looking overdrawn?
The s455 charge and benefit in kind rules catch a lot of directors. TaxTune tracks your loan account, warns you before deadlines, and plans repayments so you avoid the charges.
Let us keep your loan account clean
We track what you owe or are owed, plan repayments to avoid s455 and benefit in kind charges, and report everything correctly. Fixed fee.
Frequently asked questions
What is a director's loan account?
It records money you take from or put into your company that is not salary, dividend or expense repayment. If you take more than you are owed, the account is overdrawn and you owe the company.
What is the s455 charge?
If an overdrawn loan is not repaid within 9 months and 1 day of the company year end, the company pays a temporary tax of 33.75% of the balance. It is refunded once you repay the loan.
What is the £10,000 rule?
A director loan of more than £10,000 at any point is treated as a benefit in kind, creating tax and reporting, unless you pay interest to the company at the official rate.
How do I clear an overdrawn loan account?
Repay it in cash, or clear it by voting a dividend or bonus if profits allow, before the 9 month and 1 day deadline to avoid the s455 charge.
Can the company lend me money tax free?
A small, short term loan repaid within the deadline can be free of the s455 charge, and under £10,000 avoids the benefit in kind, but it must be recorded and repaid properly.