by Asim Abbas
11 November 2026 
Director’s loan accounts and S455 tax explained
Director’s loan accounts and S455 tax explained
If you take money out of your company that isn’t salary, dividends or expenses, it goes through your director’s loan account. Used carefully, it’s a normal part of running a company.
- An overdrawn loan account means you owe the company money
- Unpaid balances can trigger S455 tax on the company
- S455 is 35.75% for loans made from 6 April 2026
- Loans over £10,000 can create a benefit in kind
But if the account is overdrawn at the year end and not repaid in time, your company can face an extra tax charge of 35.75%, and you may owe personal tax too.
This guide explains how director’s loans work, what S455 tax is and how to avoid unexpected bills.
What is a director’s loan account?
It’s a record of money moving between you and your company that isn’t salary, dividends or a business expense. If you’ve put money in, the company owes you. If you’ve taken more out than you put in, the account is overdrawn and you owe the company.
What is S455 tax?
If an overdrawn balance is still unpaid nine months and one day after the company’s year end, the company pays S455 tax on it. The rate tracks the higher rate of dividend tax.
| Loan made | S455 rate |
|---|---|
| 6 April 2022 to 5 April 2026 | 33.75% |
| On or after 6 April 2026 | 35.75% |
S455 isn’t a permanent cost. The company can reclaim it once the loan is repaid, written off or released, but only nine months and one day after the end of the accounting period in which repayment happens. That can tie up cash for a long time.
Your company’s year ends 31 March 2027. You borrowed £30,000 in May 2026 and still owe it on 1 January 2028. The company pays S455 of 35.75% × £30,000 = £10,725 alongside its Corporation Tax.
Dividend tax calculator
See the cost of clearing a loan with dividends.
Personal tax on director’s loans
If the loan is over £10,000 at any point in the tax year and you pay less than HMRC’s official rate of interest, the difference is a taxable benefit in kind. It goes on a P11D, and the company pays Class 1A National Insurance on it. The official rate is published on GOV.UK.
How to clear an overdrawn account
- Repay it from personal funds before the deadline
- Declare a dividend, if there are enough retained profits, and set it against the loan
- Pay a bonus through payroll, which is taxed as salary
- Write it off, which is taxed on you as a dividend
Be careful with “bed and breakfasting”. Repaying £5,000 or more and borrowing it again within 30 days usually doesn’t count as a repayment for S455.
Fixed-fee accountancy support
Transparent monthly packages for sole traders, landlords and limited companies. Fixed fees agreed upfront, VAT included.
Get a fixed-fee quoteCall 0161 531 4179Keep good records
Log every transaction through the loan account and review it before each year end. Our limited company accountants and bookkeeping service track it for you, and our tax planning team can plan the cheapest way to clear it. HMRC’s guidance is on GOV.UK.
What should I do next?
Before the year end, not after.
Repayment, dividend or bonus.
Avoid re-borrowing straight after repaying.
Our company team can check your account.
Frequently Asked Questions
What is the S455 rate for 2026/27?
35.75% for loans made on or after 6 April 2026. Loans made between 6 April 2022 and 5 April 2026 stay at 33.75%.
When is S455 tax due?
Nine months and one day after the end of the accounting period, at the same time as Corporation Tax.
Can my company get S455 tax back?
Yes. It can be reclaimed once the loan is repaid, written off or released, but only nine months and one day after the end of the period in which that happens.
Is a director’s loan a benefit in kind?
If it’s over £10,000 and interest is below HMRC’s official rate, the interest saved is a taxable benefit.
Can Wingate manage my director’s loan account?
Yes. We record it in your bookkeeping, flag issues before the year end and handle the CT600A.
Need help with this? Wingate Accountants offers fixed-fee online accountancy support across the UK. Call 0161 531 4179 or request a quote at wingateaccountants.co.uk.
About the Author
Asim Abbas
I’m Asim Abbas, founder of Wingate Accountants and a Chartered Certified Accountant. I help sole traders, landlords and directors stay on top of their tax with fixed fees and plain-English advice.
