A director's loan is money you take out of your company that isn't salary, a dividend, or repayment of expenses — or money you put in. The company records it in a director's loan account (DLA), and the rules matter: take too much out and leave it unpaid, and the company faces a temporary tax charge; owe more than £10,000 and it counts as a taxable benefit. Used carefully, a director's loan is a legitimate, flexible tool. Used carelessly, it's one of the most common ways small companies trip into unexpected tax. Here's how it works and how to stay on the right side of the rules.
Figures and rules are sourced to gov.uk; some figures change, so confirm before relying on them. General guidance, not personal advice.
What a director's loan account is
Your DLA is simply the running record of money flowing between you and the company outside the normal salary/dividend/expense channels. It can be:
Overdrawn — you owe the company (you've taken out more than you put in or are owed). This is where the tax traps live.
In credit — the company owes you (you've lent it money). The company can repay you tax-free, and can even pay you interest.
Everyday examples of an overdrawn DLA: paying a personal bill from the company account, taking a lump sum before profits are available for a dividend, or drawings that exceed your salary and declared dividends.
If your loan is overdrawn at the company year end and still not repaid within nine months and one day of that year end, the company must pay a temporary Corporation Tax charge (known as S455) on the outstanding amount (gov.uk).
gov.uk states this rate as 33.75% of the outstanding balance. Note that the S455 rate is aligned to the dividend upper rate, which rose for 2026/27, so confirm the current rate before you rely on it. The key point either way: it's a significant charge — and it's refundable once you repay the loan, but only after a wait, so it's far better to avoid triggering it.
Trap 2: the £10,000 benefit-in-kind rule
If, at any point in the tax year, you (as a shareholder-director) owe the company more than £10,000, the loan is treated as a benefit in kind (gov.uk). That means:
The company must report it on a P11D and pay Class 1A National Insurance on it.
You may have a personal tax charge unless the company charges you interest at HMRC's official rate.
So crossing £10,000 — even briefly — brings extra reporting and potential tax, which catches a lot of directors out.
Trap 3: "bed and breakfasting"
You can't dodge the S455 charge by repaying the loan just before year end and taking it out again shortly after. HMRC's "bed and breakfasting" rules counter exactly that — broadly, where £5,000+ is repaid and similar amounts redrawn within 30 days, or where repayments are made with the intention of redrawing. Repayments have to be genuine.
Here's the quick reference:
Situation
What happens
Loan repaid within 9 months + 1 day of year end
No S455 charge
Loan still owed after that
Company pays S455 (refundable on repayment)
You owe over £10,000 at any point
Benefit in kind: P11D + Class 1A NIC (unless interest charged at the official rate)
Repay then quickly redraw
"Bed and breakfasting" rules may still treat it as outstanding
It's a useful tool if you keep to a few habits: record every transaction in the DLA, keep the balance under £10,000, clear an overdrawn loan within the nine-month window, and if you do charge interest, document it. If you've lent money to the company, you can draw it back when cash allows, tax-free. The golden rule is to treat company money as the company's — and to flag a loan to your accountant early, before year end, not after.
Keeping out of the traps
Director's loans are legitimate and flexible, but the S455 charge, the £10,000 threshold and the anti-avoidance rules make them easy to get wrong. Go Limited connects you with a partner accountant who'll keep your loan account clean, warn you before a deadline bites, and structure repayments properly. See our accountancy page, or our guide on how to pay yourself from a limited company for the salary/dividend side.
What is a director's loan?
Money you take out of your company that isn't salary, a dividend or expense repayment — or money you lend to the company. It's tracked in the director's loan account. An overdrawn loan (you owe the company) is the one with tax consequences.
How is a director's loan taxed?
If an overdrawn loan isn't repaid within nine months and one day of the company's year end, the company pays a temporary S455 Corporation Tax charge on the balance (gov.uk states 33.75%; confirm the current rate, as it tracks the dividend upper rate). It's refundable when you repay. Separately, owing more than £10,000 makes it a benefit in kind with P11D reporting and Class 1A NIC.
How much can I borrow from my company?
There's no fixed limit, but once you owe more than £10,000 at any point in the year it's treated as a benefit in kind, bringing extra tax and reporting. Many directors keep the balance under £10,000 to avoid that.
Can I repay a director's loan and take it out again?
Not as a way to avoid the S455 charge. HMRC's "bed and breakfasting" rules counter repaying just before year end and redrawing soon after. Repayments need to be genuine.
Is a director's loan a good idea?
It can be a handy short-term tool if used carefully and recorded properly. The risk is the tax traps — S455, the £10,000 rule and anti-avoidance — so it's worth running any sizeable loan past your accountant before year end.
A director's loan is money you take out of your company that isn't salary, a dividend, or repayment of expenses — or money you put in. The company records it in a director's loan account (DLA), and the rules matter: take too much out and leave it unpaid, and the company faces a temporary tax charge; owe more than £10,000 and it counts as a taxable benefit. Used carefully, a director's loan is a legitimate, flexible tool. Used carelessly, it's one of the most common ways small companies trip into unexpected tax. Here's how it works and how to stay on the right side of the rules.
Figures and rules are sourced to gov.uk; some figures change, so confirm before relying on them. General guidance, not personal advice.
What a director's loan account is
Your DLA is simply the running record of money flowing between you and the company outside the normal salary/dividend/expense channels. It can be:
Overdrawn — you owe the company (you've taken out more than you put in or are owed). This is where the tax traps live.
In credit — the company owes you (you've lent it money). The company can repay you tax-free, and can even pay you interest.
Everyday examples of an overdrawn DLA: paying a personal bill from the company account, taking a lump sum before profits are available for a dividend, or drawings that exceed your salary and declared dividends.
If your loan is overdrawn at the company year end and still not repaid within nine months and one day of that year end, the company must pay a temporary Corporation Tax charge (known as S455) on the outstanding amount (gov.uk).
gov.uk states this rate as 33.75% of the outstanding balance. Note that the S455 rate is aligned to the dividend upper rate, which rose for 2026/27, so confirm the current rate before you rely on it. The key point either way: it's a significant charge — and it's refundable once you repay the loan, but only after a wait, so it's far better to avoid triggering it.
Trap 2: the £10,000 benefit-in-kind rule
If, at any point in the tax year, you (as a shareholder-director) owe the company more than £10,000, the loan is treated as a benefit in kind (gov.uk). That means:
The company must report it on a P11D and pay Class 1A National Insurance on it.
You may have a personal tax charge unless the company charges you interest at HMRC's official rate.
So crossing £10,000 — even briefly — brings extra reporting and potential tax, which catches a lot of directors out.
Trap 3: "bed and breakfasting"
You can't dodge the S455 charge by repaying the loan just before year end and taking it out again shortly after. HMRC's "bed and breakfasting" rules counter exactly that — broadly, where £5,000+ is repaid and similar amounts redrawn within 30 days, or where repayments are made with the intention of redrawing. Repayments have to be genuine.
Here's the quick reference:
Situation
What happens
Loan repaid within 9 months + 1 day of year end
No S455 charge
Loan still owed after that
Company pays S455 (refundable on repayment)
You owe over £10,000 at any point
Benefit in kind: P11D + Class 1A NIC (unless interest charged at the official rate)
Repay then quickly redraw
"Bed and breakfasting" rules may still treat it as outstanding
It's a useful tool if you keep to a few habits: record every transaction in the DLA, keep the balance under £10,000, clear an overdrawn loan within the nine-month window, and if you do charge interest, document it. If you've lent money to the company, you can draw it back when cash allows, tax-free. The golden rule is to treat company money as the company's — and to flag a loan to your accountant early, before year end, not after.
Keeping out of the traps
Director's loans are legitimate and flexible, but the S455 charge, the £10,000 threshold and the anti-avoidance rules make them easy to get wrong. Go Limited connects you with a partner accountant who'll keep your loan account clean, warn you before a deadline bites, and structure repayments properly. See our accountancy page, or our guide on how to pay yourself from a limited company for the salary/dividend side.
What is a director's loan?
Money you take out of your company that isn't salary, a dividend or expense repayment — or money you lend to the company. It's tracked in the director's loan account. An overdrawn loan (you owe the company) is the one with tax consequences.
How is a director's loan taxed?
If an overdrawn loan isn't repaid within nine months and one day of the company's year end, the company pays a temporary S455 Corporation Tax charge on the balance (gov.uk states 33.75%; confirm the current rate, as it tracks the dividend upper rate). It's refundable when you repay. Separately, owing more than £10,000 makes it a benefit in kind with P11D reporting and Class 1A NIC.
How much can I borrow from my company?
There's no fixed limit, but once you owe more than £10,000 at any point in the year it's treated as a benefit in kind, bringing extra tax and reporting. Many directors keep the balance under £10,000 to avoid that.
Can I repay a director's loan and take it out again?
Not as a way to avoid the S455 charge. HMRC's "bed and breakfasting" rules counter repaying just before year end and redrawing soon after. Repayments need to be genuine.
Is a director's loan a good idea?
It can be a handy short-term tool if used carefully and recorded properly. The risk is the tax traps — S455, the £10,000 rule and anti-avoidance — so it's worth running any sizeable loan past your accountant before year end.
