Director's loan account
s455 calculator: what your overdrawn loan will cost
If your director's loan account is still overdrawn 9 months and 1 day after your year end, the company pays section 455 tax on it. Enter your drawings to see the charge and the date you need to repay by.
What is the s455 tax rate on a director's loan?
The basics
What section 455 tax is
Section 455 of the Corporation Tax Act 2010 charges the company, not the director, when a loan to a participator, in practice usually an overdrawn director's loan account, is still outstanding 9 months and 1 day after the end of the accounting period. It is not a penalty and it is not permanent: it is best thought of as a deposit HMRC holds while the loan is unpaid. Once the loan is repaid, released or written off, the company can claim the tax back.
It only applies to close companies, which covers almost every small owner-managed limited company, and it is worked out separately for every loan the company has made to a director or shareholder.
The rate
The rate: 33.75% or 35.75%
The rate depends on when each amount was drawn: 33.75% for amounts drawn before 6 April 2026, 35.75% for amounts drawn on or after that date.
That means a loan drawn in, say, June 2024 stays at 33.75% for as long as it remains unpaid, even if it is still outstanding well into 2027. A new loan drawn from 6 April 2026 onwards is charged at 35.75%. The calculator above applies the right rate to each drawing automatically, based on the date you enter.
Getting it back
Getting the tax back
Section 455 tax is refundable once the loan it relates to has been repaid, released or written off. The claim becomes due 9 months and 1 day after the end of the accounting period in which that happened, and you have up to 4 years from that date to make the claim. Miss that window and the claim is lost, so it is worth tracking repaid loans against the deadline rather than assuming the refund happens automatically.
Timing rules
Repaying and redrawing: the bed and breakfasting rules
HMRC has two rules aimed at repaying a loan just before the deadline and drawing it straight back out again. This is not advice to try either route, just what the rules actually say.
The 30-day rule. If, within any 30-day period, repayments totalling £5,000 or more and new loans totalling £5,000 or more both happen, the repayment is matched against the new loan rather than the original one for section 455 purposes. In practice that can mean the "repayment" does not reduce the s455 charge at all.
The arrangements rule. This applies where the amount outstanding was at least £15,000 before a repayment is made, and arrangements had already been made, at that time, for at least £5,000 of new borrowing. Again, the repayment gets matched against the new arrangement rather than clearing the old balance.
Over £10,000
Loans over £10,000
Section 455 tax is worked out separately from the benefit-in-kind rules. If, as a shareholder and director, you owe your company more than £10,000 at any point, HMRC can treat the loan as a taxable benefit in kind on top of any section 455 tax, unless you pay interest to the company at HMRC's official rate. The calculator above flags this using your year-end balance as a proxy: the £10,000 test actually applies at any point the balance was exceeded during the year, not just at the year end.
Clearing the balance
Ways to clear an overdrawn account
- Repay from personal funds. The simplest route: transfer money back into the company. It clears the balance directly and has no tax consequences of its own.
- Declare a dividend. If the company has enough distributable profits, a dividend can be voted and used to clear the balance instead of being paid out in cash. It is still taxable on you as a dividend in the tax year it is declared.
- Pay a bonus through payroll. A bonus can clear the balance the same way, but it is taxed as employment income through PAYE, with Income Tax and National Insurance due, so more of it is lost to tax than a dividend of the same size.
Questions
Section 455 tax, answered
What is s455 tax?
Section 455 (usually written s455) is a Corporation Tax charge on a director's loan that is still outstanding 9 months and 1 day after the company's accounting period ends. The company pays it, not the director, and it is temporary: HMRC repays it once the loan is repaid, released or written off.
What is the s455 tax rate in 2026?
The rate depends on when each amount was drawn: 33.75% for amounts drawn before 6 April 2026, 35.75% for amounts drawn on or after that date. The rate is fixed by when the loan was drawn, not by the year end or when you eventually repay it.
What does an overdrawn director's loan account mean?
Your director's loan account is overdrawn when you have taken more out of the company, in cash, personal card spending or anything else that is not salary, dividends or a repayment of expenses, than you have put in. The overdrawn balance is treated as a loan from the company to you.
Can I borrow money from my limited company?
Yes, there is no rule against it, but it is not free money. If the balance is still outstanding 9 months and 1 day after your year end, the company pays section 455 tax on it, and if the balance goes over £10,000 at any point you may also face a separate benefit-in-kind charge.
What are the director's loan bed and breakfasting rules?
HMRC has two anti-avoidance rules for repaying and redrawing loans close together. Under the 30-day rule, if repayments of £5,000 or more and new loans of £5,000 or more both happen within any 30-day window, the repayment is matched against the new loan instead of the old one for s455 purposes. Under the arrangements rule, if the balance was at least £15,000 before a repayment and, at that time, arrangements existed for at least £5,000 of new borrowing, the same matching applies. Both exist to stop a loan being repaid just before the deadline and redrawn straight after.
What happens if I can't pay back my director's loan?
If the balance is still outstanding at the repay-by date, the company simply pays the section 455 tax due on it. It is not a criminal matter and there is no separate penalty for the loan itself. Once you do repay it, the company can reclaim the tax, so it is a cash flow cost, not a permanent one.
How do I get section 455 tax back?
Once the loan is repaid, released or written off, the company can claim the s455 back. The claim becomes due 9 months and 1 day after the end of the accounting period in which the loan was repaid, and you have up to 4 years from that date to claim it.
What happens if my director's loan goes over £10,000?
If, at any point, you owe your company more than £10,000, HMRC can treat the loan as a taxable benefit in kind, on top of any section 455 tax, unless you pay interest at HMRC's official rate.
Sources, checked on
- CTM61505: the s455 rate by tax year
- Director's loans: you owe your company money
- CTM61630: the 30-day repayment rule
- CTM61635: the arrangements rule
General guidance, not advice for your situation. Rules change: always check the GOV.UK page before you act.
Keep your director's loan account under control
Finn tracks what you owe the company all year, so an overdrawn balance never sneaks up on you at year end.
General guidance, not advice for your situation. Always check GOV.UK or your accountant before you act.