Last updated: September 2026
By Anne Collins and Lisa Pirie, ICB-licensed bookkeepers at Acey Bookkeeping. Winners, ICB LUCA Awards 2025.
A director’s loan calculator shows the tax on money you take from your limited company beyond salary and dividends. You enter your overdrawn balance and the date you borrowed. The tool returns your s455 charge at 33.75% or 35.75%, your repayment deadline, and any benefit-in-kind on the interest.
Most owner-directors do not spot an overdrawn loan until year-end. By then the tax clock is already running. In practice, the worst bills come from small, forgotten withdrawals that quietly add up.
This page shows your exposure in seconds. Then it walks you through clearing the loan in time, in plain English.
Director’s Loan Calculator
This director’s loan calculator estimates your tax in three inputs. You enter the overdrawn balance, the date the loan was advanced, and your accounting period end. The calculator then shows your s455 charge, the exact repayment deadline, and whether a benefit-in-kind applies to the loan interest.
Developer note: place the interactive tool here. Inputs: overdrawn balance, date advanced (this sets the rate), accounting period end (this sets the deadline), and any interest charged. Outputs: s455 due, the repay-by date, and a rough benefit-in-kind figure. Show which rate applied and why.
What is a director’s loan account?
A director’s loan account (DLA) is a record of money passing between you and your limited company that is not salary, dividend, or expense repayment. Your DLA is overdrawn when you owe the company. UK tax rules treat an overdrawn DLA as a loan to a participator, which can trigger tax.
Money moves both ways through a DLA. You put money in when you lend the company cash or cover its costs personally. You take money out when you draw funds beyond your salary and dividends.
A participator is a person with a share or financial stake in a close company. A close company is a UK company controlled by five or fewer participators, or by its directors. Most small limited companies are close companies.
Is my director’s loan overdrawn?
Your director’s loan is overdrawn when you owe your company more than it owes you. This usually happens when your withdrawals beat your salary, dividends, and expense claims. Check the DLA balance in your accounts. A debit balance means overdrawn, and any overdrawn amount at year-end can trigger s455 tax.
Common causes of an overdrawn DLA include:
- Paying personal costs from the company bank account or card.
- Taking cash drawings before the company has the profit for dividends.
- Voting dividends without enough distributable profit to cover them.
Your bookkeeping records show the running balance. Ask your bookkeeper or check your DLA nominal code. The figure at your accounting period end is the one that counts for s455.
According to Anne Collins, ICB-licensed bookkeeper at Acey Bookkeeping, speaking in September 2026: “ The overdrawn accounts we see are rarely one big withdrawal. They are dozens of small personal payments that no one flagged in time.”
How much s455 tax will I pay?
s455 tax is a corporation tax charge on an overdrawn director’s loan left unpaid nine months and one day after your accounting period ends. The charge is 35.75% of the balance for loans advanced on or after 6 April 2026, and 33.75% for earlier loans. A £20,000 loan costs £7,150 or £6,750.
The charge falls on the company, not on you personally. The rate depends on when you borrowed, not when HMRC assesses it. You can reclaim the charge once the loan is repaid.
| Overdrawn balance | s455 at 33.75% (before 6 Apr 2026) | s455 at 35.75% (on/after 6 Apr 2026) |
|---|---|---|
| £5,000 | £1,687.50 | £1,787.50 |
| £10,000 | £3,375 | £3,575 |
| £20,000 | £6,750 | £7,150 |
| £50,000 | £16,875 | £17,875 |
Under the Corporation Tax Act 2010, s455 applies to loans to participators from close companies. HMRC guidance on director’s loans confirms the charge and the deadline.
What is the s455 tax rate for 2026?
The s455 tax rate is 35.75% for director’s loans advanced on or after 6 April 2026. The rate was 33.75% before that date. It follows the dividend upper rate, which rose at the Autumn Budget 2025. The increase is not retrospective, so older loans keep the 33.75% rate.
As of 2026, two rates can apply to one account. The date each amount was borrowed fixes its rate. A balance built up across the change date carries both.
Rate history is short. The charge was 25% before April 2016, then 32.5%, then 33.75% from April 2022, and 35.75% from April 2026. Each step matched the dividend upper rate, per HMRC and the Autumn Budget 2025.
Clearing a mixed loan takes care. The order of repayment can change the tax. Keep dated records of which drawing you are repaying.
When do I have to repay my director’s loan?
You must clear an overdrawn director’s loan within nine months and one day of your accounting period end to avoid s455 tax. That is the same day your corporation tax falls due. For a 31 March year-end, the deadline is 1 January the next year. Repay by then and no s455 arises.
Partial repayment still helps. The s455 charge only applies to the amount left outstanding at the deadline. Clear half the balance and you halve the charge.
Your clock runs from your accounting period end, not the tax year. Check your own year-end date. Diarise the nine-month-and-one-day point as soon as the period closes.
Do I pay benefit-in-kind on a director’s loan?
A benefit-in-kind (BIK) arises if your director’s loan tops £10,000 at any point in the tax year and you pay interest below HMRC’s official rate. The saving counts as a taxable perk. You pay income tax on it, and the company pays Class 1A National Insurance. Charge interest at the official rate and the benefit disappears.
This charge is separate from s455. Both can apply to the same loan at the same time. One hits the company, and one hits you.
What is HMRC’s official rate of interest?
HMRC’s official rate of interest (ORI) is the benchmark used to value cheap or interest-free staff loans. As of the 2025/26 and 2026/27 tax years, the rate is 3.75%. Since 6 April 2025, HMRC can change it mid-year at quarterly reviews. Check the current rate on GOV.UK before you rely on it.
The rate sits in HMRC’s beneficial loan arrangements guidance. Class 1A National Insurance runs at 15% for 2025/26 and 2026/27. The company pays it on the benefit value, reported through a P11D or payroll.
How do I repay a director’s loan?
You can clear an overdrawn director’s loan three main ways. Pay cash back into the company. Vote a dividend and set it against the loan, if profits allow. Or credit a salary or bonus to the account. Record and date each step, and finish before the nine-month-and-one-day deadline.
- Cash repayment. Transfer personal money into the company account. This is the simplest and cleanest route.
- Dividend offset. Declare a dividend and credit it to the DLA. You need enough distributable profit and proper paperwork.
- Salary or bonus. Credit pay to the account. This triggers PAYE and National Insurance, so weigh the cost first.
PAYE (Pay As You Earn) is the system that collects income tax and National Insurance from wages. A salary route clears the loan but adds its own tax, so model it before you commit.
Can I reclaim s455 tax after I repay?
Yes. s455 tax is refundable once you repay, release, or write off the loan. The refund is not instant. You claim it nine months and one day after the end of the accounting period in which you repaid. So the cash can sit with HMRC for well over a year. You claim using form L2P.
Plan for the delay. The refund timing means s455 ties up cash even when you fix the loan quickly. Factor that gap into your cash flow.
What is bed-and-breakfasting a director’s loan?
Bed-and-breakfasting means repaying a loan just before the deadline, then re-borrowing soon after to dodge s455. HMRC blocks it. Repay £5,000 or more and redraw £5,000 or more within 30 days, and the repayment is matched to the new loan. Relief is then denied on that amount.
A second rule catches larger balances. Repay £15,000 or more while planning to redraw, and relief can be restricted, even outside the 30-day window. These anti-avoidance rules sit in the Corporation Tax Act 2010.
Director’s loan vs dividend vs salary: which is cheaper?
For most owner-directors, a small salary plus dividends beats leaving a loan overdrawn. An unpaid loan can attract s455 of up to 35.75% and a benefit-in-kind. A director’s loan suits short-term needs you will repay within nine months. Beyond that, the combined charges usually outweigh the convenience.
| Option | Best for | Main tax touchpoints |
|---|---|---|
| Director’s loan | Short-term cash you repay within 9 months | s455 if unpaid; BIK over £10,000 |
| Dividend | Sharing profit when profits exist | Dividend tax; needs distributable profit |
| Salary | Regular, reliable pay | PAYE and National Insurance |
The simple rule holds. Repay within nine months and a loan is cheap. Leave it, and it gets expensive. Writing a loan off also carries its own tax cost for you as an individual.
The bottom line on overdrawn director’s loans
Know your balance, know your deadline, and act before nine months and one day pass. Clear the loan with cash, a dividend, or salary, then reclaim the s455 once it is paid. The date you borrowed sets your rate, so check that first.
Acey Bookkeeping recovered a £20,000 overdrawn loan account for a Medway client and cleared the s455 exposure. If your figures look off, or the deadline is close, book a director’s loan review with Anne and Lisa. [Link: Acey Bookkeeping contact page]
Not sure when your loan was advanced? That single date changes your bill, and it is the first thing we check.
