Director’s Loan Account Calculator UK
Work out the tax on an overdrawn director’s loan — the Section 455 charge, the benefit-in-kind, and the cash that stays locked up at HMRC for over a year if you don’t repay in time.
A director’s loan account records money you take from your company that isn’t salary, dividend, or expenses. The trap most directors miss is that one overdrawn balance can trigger three separate tax charges, not one. If the loan isn’t repaid within nine months and one day of your year end, the company pays a Section 455 charge of 35.75% of the outstanding balance — so £30,000 overdrawn costs the company £10,725. That money is refundable, but only once you repay the loan, and then not for another nine months, so it can sit at HMRC for well over a year. On top of that, if the balance ever tops £10,000, you personally face a benefit-in-kind charge on the cheap loan. And if the company simply writes the loan off, the director is taxed on it as dividend income. This calculator shows all three charges for your balance and timing, so you can see the real cost before your year end arrives. To plan repayment through dividends, use the Limited Company Profit Calculator; to compare extraction routes, the Sole Trader vs Ltd Calculator.
Director loan balance
Dates and deadline
Interest and beneficial loan
Anti-avoidance checks
Director loan result
Estimated Section 455 tax
Calculating…
Calculating…
Outstanding loan
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Repayment needed
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BIK taxable benefit
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Class 1A NIC estimate
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After planned repayment
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Status
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Director’s loan tax — quick lookup
The left table shows the Section 455 charge your company pays on an overdrawn balance left unpaid past the deadline, at the current 35.75% rate. The right lists the key figures and dates that govern a director’s loan. The headline is in the left table: the S455 charge is large, and although it’s refundable, the cash is tied up at HMRC for well over a year.
| Overdrawn balance | S455 at 35.75% |
|---|---|
| £10,000 | £3,575 |
| £20,000 | £7,150 |
| £30,000 | £10,725 |
| £50,000 | £17,875 |
| £100,000 | £35,750 |
| Item | Value |
|---|---|
| S455 rate | 35.75% |
| Repay deadline | 9 months + 1 day |
| BIK threshold | £10,000 |
| Official rate (ORI) | 3.75% |
| Reclaim window | 4 years |
The S455 charge applies to whatever remains overdrawn nine months and one day after your company’s accounting year end. It’s paid by the company, not the director, and is refundable once the loan is repaid — but the refund itself isn’t due until nine months after the period in which you repay, so the cash is locked up for a long time. The £10,000 figure is the separate benefit-in-kind threshold for the director. The S455 rate rose from 33.75% to 35.75% on 6 April 2026.
How a director’s loan account works
A director’s loan account, or DLA, is simply the running record of money moving between you and your company that isn’t salary, dividend, reimbursed expenses, or a business payment. It can run either way. The tax only bites when it runs overdrawn — when you owe the company — and the rules that apply then catch a lot of owner-managed businesses by surprise.
Credit versus overdrawn
If the company owes you money — because you lent it funds or paid for things personally — the DLA is in credit, and you can draw that back tax-free whenever the company has the cash. The problems start when the account is overdrawn: you’ve taken out more than salary, dividends, and expenses combined. An overdrawn DLA is an asset of the company and a debt you owe it, and HMRC treats it as money that might be profit extracted without tax. That’s what the rules are designed to police.
The Section 455 charge
If your DLA is still overdrawn nine months and one day after your company’s accounting year end, the company must pay a Section 455 charge to HMRC. Since 6 April 2026 the rate is 35.75% of the outstanding balance, up from 33.75%, because it’s tied to the higher rate of dividend tax. So £30,000 left overdrawn costs the company £10,725. The charge is paid alongside the company’s normal Corporation Tax.
The catch: it’s refundable, but slowly
Here’s the part directors miss. The S455 charge is temporary — repay the loan and the company can reclaim it. But the reclaim isn’t immediate: it’s only due nine months after the end of the accounting period in which you repaid. Take a loan, leave it overdrawn past one year end, repay it the following year, and the cash can be tied up at HMRC for well over a year. For a small company, that’s a serious working-capital hit on money you’ll eventually get back. The lesson is timing: clearing the loan before the nine-month deadline avoids the charge entirely.
The £10,000 benefit-in-kind, separately
The S455 charge isn’t the only thing. If your DLA balance exceeds £10,000 at any point in the tax year, HMRC treats it as a “beneficial loan” — a cheap loan you couldn’t get elsewhere. Unless you charge yourself interest at or above HMRC’s official rate (currently 3.75%), a benefit-in-kind arises. The company reports it on a P11D and pays Class 1A National Insurance, and you pay Income Tax on the deemed interest through Self Assessment. Charging and actually paying interest at the official rate removes the charge.
Worked examples
Four scenarios showing how the same overdrawn loan plays out depending on what you do with it and when.
Scenario 1 · Loan repaid in time
No charge at all
Repaid in full by 31 December 2026 (within 9 months)
S455 charge: £0 · BIK avoided with interest at ORI
A director takes £30,000 during the year but clears it before the nine-month-and-one-day deadline. Because nothing is overdrawn at that point, no Section 455 charge arises. If the balance topped £10,000 at any point, they keep it clean by charging themselves interest at the 3.75% official rate. Repaying in time is the simplest, cheapest outcome — and the whole point of monitoring the DLA.
Scenario 2 · Loan left overdrawn
The Section 455 charge bites
S455 charge: £30,000 × 35.75% = £10,725
Paid by the company · refundable, but not for over a year
The same £30,000, but the director doesn’t repay it. Nine months and one day after the 31 March year end, the company owes HMRC £10,725 on top of its Corporation Tax. It will get that back once the loan is cleared, but the refund won’t arrive until nine months after that — so the company is out of pocket on £10,725 for a long stretch. The loan itself is still owed too; the S455 charge is separate from repaying the debt.
Scenario 3 · Loan over £10,000, no interest
The benefit-in-kind on top
Deemed benefit: £35,000 × 3.75% = £1,312.50
Director pays Income Tax on it · company pays Class 1A NIC
A director keeps £35,000 overdrawn through the year and charges no interest. Because the balance is over £10,000, a benefit-in-kind arises on the deemed interest of £1,312.50. The director pays Income Tax on that figure via Self Assessment, and the company pays Class 1A National Insurance on it. This sits alongside any S455 charge, not instead of it — which is how one overdrawn loan generates two separate tax liabilities.
Scenario 4 · Loan written off
Taxed as a dividend
Treated as dividend income for the director
Dividend tax at higher rate: £30,000 × 35.75% = £10,725
If the company gives up and writes the loan off, the director doesn’t escape — the written-off amount is treated as dividend income and taxed accordingly. For a higher-rate taxpayer that’s £10,725 of personal tax on the £30,000. Any S455 the company already paid can become reclaimable, but the director’s personal bill stands. Writing off a director’s loan is rarely the clean solution it sounds like.
One overdrawn loan, three possible taxes
Most guidance treats the director’s loan as a single tax problem — the Section 455 charge. In reality, one overdrawn balance can trigger up to three separate charges, hitting the company and the director in different ways. Knowing which apply to you is the whole game. Work through the layers:
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1
Section 455 — paid by the company
If the loan is still overdrawn nine months and one day after year end, the company pays 35.75% of the balance to HMRC. Refundable once the loan is repaid, but the cash is locked up for over a year. This is the charge everyone knows about.
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2
Benefit-in-kind — paid by the director
If the balance tops £10,000 at any point and you don’t charge interest at the official rate, a benefit-in-kind arises on the deemed interest. The director pays Income Tax on it; the company pays Class 1A NIC. This applies even if you repay before the S455 deadline.
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3
Dividend tax — if the loan is written off
If the company writes the loan off rather than collecting it, the director is taxed on it as dividend income. For a higher-rate taxpayer that’s 35.75% of the written-off amount, personally. Writing off doesn’t make the tax disappear, it moves it to you.
£30,000 overdrawn — left unmanaged, then written off
Worst case, all three layers stacking up over time:
That £30,000 loan, mishandled, can put more than £21,000 of tax in motion across the company and the director — even though the S455 element is refundable in the end. Compare that with Scenario 1, where repaying in time costs nothing. The gap between the best and worst outcome on the same loan is enormous, and it comes down entirely to timing and what you do with the balance. The practical takeaway: monitor the DLA monthly, clear it before the nine-month deadline where you can, and charge interest at the official rate if it sits above £10,000. The charges only stack up when the loan is left to drift.
The “bed and breakfasting” trap
One tempting fix doesn’t work. Repaying the loan just before the deadline and then taking it straight back out afterwards — known as “bed and breakfasting” — is exactly what HMRC’s anti-avoidance rules target. If you repay and re-borrow a similar sum within a short window (broadly 30 days, or under arrangements), HMRC can treat the repayment as never having happened for S455 purposes, leaving the charge in place. Genuine repayment, ideally funded by a real dividend or salary you can support from profits, is the only reliable way to clear an overdrawn DLA. Use the Limited Company Profit Calculator to check you have the retained profit to declare a dividend.
Two scenarios that change the picture
What if…
You repay one day before the deadline?
What if…
You charge yourself interest at the official rate?
Key director’s loan terms explained
A director’s loan account brings together company tax, personal tax, and a set of HMRC deadlines and anti-avoidance rules. The ten terms below cover what you’ll meet when a balance runs overdrawn.
- Director’s loan account (DLA)
- The running record of money moving between you and your company that isn’t salary, dividend, or expenses. It can be in credit (the company owes you) or overdrawn (you owe the company). Only the overdrawn side carries tax consequences.
- Overdrawn DLA
- When you’ve taken more out of the company than salary, dividends, and expenses combined. The balance is a debt you owe and an asset of the company, and it’s the trigger for the Section 455 charge and the benefit-in-kind rules.
- Section 455 charge (s455)
- A Corporation Tax charge of 35.75% of the overdrawn balance the company pays if the loan isn’t repaid within nine months and one day of year end. Named after section 455 of the Corporation Tax Act 2010. Refundable once the loan is cleared.
- Participator
- A person with a share or interest in a close company — typically a director-shareholder or their close family. The S455 charge applies to loans to participators, which is why it catches most owner-managed company directors.
- Nine months and one day
- The deadline for repaying an overdrawn DLA to avoid the S455 charge, measured from the company’s accounting year end. It’s the same date the company’s Corporation Tax is due. Miss it and the charge applies to whatever remains overdrawn.
- Benefit-in-kind (BIK)
- A personal tax charge on the director when the loan exceeds £10,000 at any point and no interest is charged at the official rate. The director pays Income Tax on the deemed interest; the company pays Class 1A National Insurance.
- Official rate of interest (ORI)
- HMRC’s benchmark rate used to value a cheap loan, currently 3.75%. Charging and paying interest at or above this rate on a balance over £10,000 removes the benefit-in-kind. HMRC can now change the rate during a tax year.
- Bed and breakfasting
- Repaying the loan just before the deadline and re-borrowing a similar sum shortly after to dodge S455. HMRC’s anti-avoidance rules can disregard the repayment, leaving the charge in place. Genuine repayment is the only reliable route.
- Loan write-off
- When the company gives up collecting the loan. The written-off amount is treated as dividend income for the director and taxed accordingly — so the tax doesn’t vanish, it moves from the company’s S455 to the director personally.
- S455 reclaim
- Recovering the S455 charge once the loan is repaid, written off, or released, claimed through the CT600A pages. The refund isn’t due until nine months after the period of repayment, and HMRC allows reclaims within four years.
Five mistakes directors make with loan accounts
The director’s loan account catches owner-managed businesses out precisely because the rules are easy to ignore until a deadline passes. These five errors, drawn from the recurring r/UKPersonalFinance and r/SmallBusinessUK threads, are the expensive ones.
Treating company cash as personal cash
Dipping into the company account for personal spending without recording dividends or salary builds an overdrawn DLA almost invisibly. By year end the balance can be far larger than expected, with S455 and benefit-in-kind charges waiting. Keep personal and company money separate, and record every withdrawal as it happens.
Cost: an unplanned S455 bill Fix: record withdrawals, keep accounts separateMissing the nine-month deadline
The S455 charge applies to whatever’s still overdrawn nine months and one day after year end. Directors who only think about the loan at the annual accounts stage often miss the window to clear it. Diarise the deadline and review the balance with months to spare, so you can declare a dividend or repay before it bites.
Cost: 35.75% of the balance to HMRC Fix: diarise the deadline, clear it earlyThinking S455 is the only charge
A balance over £10,000 also triggers a benefit-in-kind, separate from S455, with Income Tax for you and Class 1A NIC for the company. And a write-off brings dividend tax. One overdrawn loan can generate three charges. Plan for all three, not just the headline S455 figure.
Cost: surprise BIK and dividend tax Fix: account for all three possible chargesBed and breakfasting the balance
Repaying just before the deadline then taking the money straight back out looks like a clever dodge, but HMRC’s anti-avoidance rules can ignore the repayment and apply S455 anyway. Re-borrowing a similar sum within around 30 days is the trap. Only a genuine, lasting repayment clears the charge.
Cost: S455 applies despite the repayment Fix: repay genuinely, don’t re-borrow at onceForgetting interest on a balance over £10,000
If the loan tops £10,000 and you charge no interest at the official rate, a benefit-in-kind arises even if you repay before the S455 deadline. The fix is cheap: charge and actually pay interest at HMRC’s 3.75% official rate, which removes the BIK entirely. Many directors simply overlook it.
Cost: avoidable Income Tax and Class 1A NIC Fix: charge interest at the 3.75% official rateFrequently asked questions
What is a director’s loan account?
A director’s loan account is the running record of money moving between you and your company that isn’t salary, dividend, reimbursed expenses, or a business payment. It can be in credit, where the company owes you, or overdrawn, where you owe the company.
A credit balance can be repaid to you tax-free. The tax rules only bite when the account is overdrawn — that’s when the Section 455 charge and benefit-in-kind rules come into play.
What is the Section 455 tax charge?
Section 455 is a Corporation Tax charge the company pays if a director’s loan is still overdrawn nine months and one day after the accounting year end. The rate is 35.75% of the outstanding balance from 6 April 2026, up from 33.75%, because it’s tied to the higher rate of dividend tax.
So £30,000 left overdrawn costs the company £10,725. It’s paid alongside normal Corporation Tax and is refundable once the loan is repaid — but the refund isn’t due until nine months after the period in which you repay.
Can I get the Section 455 charge back?
Yes, the S455 charge is temporary and refundable once the loan is repaid, written off, or released. You claim it through the CT600A pages, and HMRC allows reclaims within four years of the end of the accounting period in which the repayment occurred.
The catch is timing: the refund isn’t due until nine months after the period in which you repaid. Take a loan, leave it overdrawn past a year end, repay it the following year, and the cash can be tied up at HMRC for well over a year. It comes back, but slowly.
What happens if my director’s loan goes over £10,000?
If your balance exceeds £10,000 at any point in the tax year, HMRC treats it as a “beneficial loan.” Unless you charge yourself interest at or above the official rate (currently 3.75%), a benefit-in-kind arises on the deemed interest.
You pay Income Tax on that benefit through Self Assessment, and the company pays Class 1A National Insurance on it. This is separate from the S455 charge — it can apply even if you repay before the nine-month deadline. Charging and actually paying interest at the official rate removes it.
How do I avoid the Section 455 charge?
Clear the overdrawn balance before the nine-month-and-one-day deadline. If nothing is overdrawn at that point, no S455 charge arises. You can repay with cash, or by declaring a dividend or salary to cover the balance, provided the company has the profits to support it.
What doesn’t work is “bed and breakfasting” — repaying just before the deadline and re-borrowing a similar sum shortly after. HMRC’s anti-avoidance rules can disregard a repayment reversed within around 30 days, leaving the charge in place. Only a genuine repayment clears it.
What happens if the company writes off my loan?
Writing the loan off doesn’t make the tax disappear — it moves it to you. The written-off amount is treated as dividend income for the director and taxed at your dividend rate. For a higher-rate taxpayer, £30,000 written off means £10,725 of personal tax.
Any S455 the company already paid can become reclaimable when the loan is released, but your personal dividend tax bill stands. Writing off a director’s loan is rarely the clean fix it sounds like, and there can be National Insurance implications too.
Who pays the S455 charge — me or the company?
The company pays the Section 455 charge, as part of its Corporation Tax. It’s not a personal tax on the director. That’s an important distinction: the S455 charge sits with the company, while the benefit-in-kind (if the balance tops £10,000) and the dividend tax (if the loan is written off) are personal charges on you.
This is why one overdrawn loan can touch both the company and the director in different ways. The company carries the refundable S455; you carry any BIK and any write-off tax.
Does an overdrawn loan disappear if I resign as director?
No. An overdrawn director’s loan is a debt you owe the company, and it remains repayable even if you resign. The balance stays an asset of the company. It can be offset against a dividend or formally written off, both of which carry their own tax consequences.
In an insolvency, a liquidator can pursue you for the outstanding amount. Resigning doesn’t clear the loan — it has to be repaid, written off, or otherwise dealt with. Get advice from an accountant before assuming a balance has gone away. See official guidance at gov.uk.
Related calculators
A director’s loan connects to how you extract money from your company, the profit behind any dividend, and your wider take-home. These calculators handle each piece.
Methodology & sources
How the maths works
The calculator takes your overdrawn balance and applies the current Section 455 rate of 35.75% to whatever remains unpaid nine months and one day after your accounting year end — so a £30,000 balance produces a £10,725 charge, paid by the company. It separately checks whether the balance exceeds the £10,000 benefit-in-kind threshold; if so, and no interest is charged, it applies HMRC’s official rate of 3.75% to the balance to show the deemed interest on which the director pays Income Tax and the company pays Class 1A National Insurance. For a write-off, it treats the released amount as dividend income taxed at the director’s dividend rate. The S455 charge is shown as refundable, with the refund due nine months after the period of repayment.
These are illustrative comparisons to show how the charges behave on a given balance. Real outcomes depend on your exact year end and repayment dates, the split of the balance across the rate change on 6 April 2026, your personal tax position, whether interest is actually paid, and the current rates and thresholds, all of which can change. The aim is to reveal how one overdrawn loan can generate up to three separate charges, and how timing changes everything, not to replace tailored accountancy advice.
Assumptions and conventions used
- S455 rate: 35.75% of the overdrawn balance (33.75% before 6 April 2026)
- S455 deadline: nine months and one day after the accounting year end
- BIK threshold: £10,000 at any point in the tax year
- Official rate of interest: 3.75%
- Write-off: treated as dividend income for the director
- S455 reclaim: within four years; refund due 9 months after the repayment period
- Rate split across 6 April 2026 not modelled in the headline figures
- Rates and thresholds shown are illustrative current UK figures