Director’s Loan Account: Tax, s455, Repayment & Reporting
A director’s loan account records money moving between a director and their company outside normal salary, dividend and expense transactions.
Whether the company owes the director or the director owes the company can affect Corporation Tax, CT600A, beneficial-loan reporting, dividends, payroll and personal tax.
What Is a Director’s Loan Account?
A director’s loan account is an accounting record showing amounts owed between a director and their limited company.
It commonly records transactions that are not ordinary business expenses, salary, dividends or subscribed share capital.
The closing balance is important because the tax consequences can be very different depending on whether the company owes the director or the director owes the company.
What Can Change a Director’s Loan Account?
The DLA is usually built from several transactions throughout the accounting period rather than one single withdrawal.
Personal Withdrawals
Money transferred from the company to the director for personal use can increase an overdrawn DLA.
Personal Costs Paid by Company
Private expenditure paid from the company can also increase the amount owed by the director.
Business Costs Paid Personally
Genuine company expenditure paid personally by the director can create or increase a credit DLA.
Cash Introduced
Money lent personally to the company normally creates a balance owed back to the director.
Dividends
A valid dividend can potentially be credited against an overdrawn DLA where the shareholder is entitled to it.
Salary & Expenses
Properly processed remuneration and genuine expense reimbursements can affect the balance.
The Direction of the Loan Changes the Tax Analysis
Credit DLA
A credit balance can arise where the director lends money to the company or pays company expenditure personally.
- Company records a liability
- Principal can normally be repaid
- Director may charge interest
- CT61 may become relevant where interest is paid
Overdrawn DLA
An overdrawn balance exists where the director has received company funds which have not otherwise been treated as salary, dividend, expense reimbursement or repayment of a credit balance.
- s455 may apply
- CT600A reporting may be needed
- Beneficial-loan rules may apply
- Repayment timing becomes important
What Happens When an Overdrawn DLA Remains Outstanding?
Where the relevant close-company rules apply, an outstanding loan to a participator can create an additional Corporation Tax charge under section 455.
For relevant loans made on or after 6 April 2026, the s455 rate is 35.75%.
Historic loans should be reviewed using the rate applicable when the relevant loan was made.
Read the full s455 Corporation Tax guide →The timing of a qualifying repayment after the company’s accounting period can determine whether s455 ultimately becomes payable.
The Director’s Loan 9 Month Rule
A loan outstanding at the accounting date does not automatically mean that s455 must ultimately be paid.
Where qualifying repayment or other relief occurs within the relevant period, relief may reduce or eliminate the amount payable.
However, the loan can still need to be reported on CT600A even where it is repaid after year end.
Read the Director’s Loan 9 Month Rule →What If the Director’s Loan Exceeds £10,000?
An overdrawn DLA can also create employment-benefit consequences where the director receives interest-free or cheap borrowing from the company.
The small-loan exemption should be reviewed where the total relevant loan balance approaches or exceeds £10,000.
Where a taxable benefit arises, P11D and Class 1A National Insurance reporting may need to be considered.
Read Director’s Loan Over £10,000 →Both regimes may need to be reviewed independently.
Common Ways a Director’s Loan Can Be Reduced
The appropriate method depends on the company’s profits, the director’s wider tax position and what transactions have genuinely occurred.
Detailed Director’s Loan Account Guides
Use the guides below to go directly to the director’s loan issue relevant to your company.
What Should Be Checked Before the Company Accounts Are Finalised?
A Director’s Loan Usually Connects to the Wider Company Accounts
Director’s loan issues are easier to resolve when the underlying bookkeeping, annual accounts, payroll and Corporation Tax records are reviewed together.
Director’s Loan Resources
Director’s Loan Account FAQs
Common questions from directors and owner-managed companies.
What is a director’s loan account?
It is an accounting record of money owed between a director and their company outside ordinary salary, dividend and expense transactions.
What does an overdrawn director’s loan account mean?
It generally means the director owes money to the company.
What does a credit director’s loan account mean?
It generally means the company owes money to the director.
What is the current s455 rate?
For relevant loans made on or after 6 April 2026, the s455 rate is 35.75%. Historic loans should be considered using the rate applicable to the relevant period.
Can a dividend clear a director’s loan?
A valid dividend can potentially be credited against an overdrawn DLA where sufficient distributable profits exist and the shareholder is entitled to the dividend.
Can the director simply repay the money?
Yes. Genuine cash repayment can reduce or clear the debt, although further borrowing and anti-avoidance rules may need to be considered.
Does CT600A still apply if the loan is repaid after year end?
A loan outstanding at the accounting date can still require appropriate CT600A reporting even if it is subsequently repaid.
Does a director’s loan over £10,000 create a tax benefit?
A taxable beneficial-loan position may arise where the relevant exemptions do not apply and the loan is interest-free or charged below the appropriate official rate.
Can ATA review an historic director’s loan account?
Yes. We can review the bookkeeping, reconstruct transactions, establish the year-end balance and assess the related accounting and tax reporting requirements.
Establish the Balance Before Deciding How to Clear It
Tell us the company year end, current DLA balance and the main transactions that created it. We can assess the accounting and tax position before recommending the next steps.
Tell Us About the Director’s Loan
We can review the DLA alongside the company’s bookkeeping, accounts and Corporation Tax position.