What is a director's loan and when is it taxed?

A director's loan is money you take from your company that is not salary, a dividend or an expense repayment. It is recorded in your director's loan account, and you owe it back to the company.

When tax applies:

• Repaid within 9 months and 1 day of the year end: no section 455 tax.
• Still unpaid after that: the company pays section 455 tax on the balance. The rate is 35.75% for loans made on or after 6 April 2026 and 33.75% for loans made before then.
• Repaid later: the company can reclaim the tax once the loan is repaid.
• Over £10,000 at any time in the year: if you pay less than HMRC's official interest rate (3.75% from 6 April 2026), the difference is a benefit in kind. It is taxable on you, with Class 1A National Insurance for the company.

Example: a £20,000 loan made in July 2026 and still unpaid after the deadline gives a section 455 charge of £7,150, which the company reclaims once you repay.

If the company owes you: when you have lent money to the company, you can take it back tax free.

How to clear a loan: repay the money, or offset a dividend or salary against it. Do not repay and re-borrow straight away, because anti-avoidance rules can treat the loan as never repaid.

See our dividend tax calculator to compare taking a dividend instead.

Legislation:

• Corporation Tax Act 2010, section 455 (charge to tax in case of loan to participator)