Director’s Loan Calculator – Section 455 Tax & Repayment Deadline

If you borrow money from your limited company, you may have to pay extra tax if the loan stays outstanding for too long.

Use our Director’s Loan Calculator to estimate any Section 455 tax, check the repayment deadline and see what happens if you repay the loan later.

The calculator is aimed at the common situation where a company director is also a shareholder and has an overdrawn director’s loan account.

Director’s Loan Calculator

What is a director’s loan?

A director’s loan usually arises when you take money out of your company and it is not salary, a dividend, an expense repayment or money the company already owes you.

The amount goes through your director’s loan account. If you owe the company money, the account is overdrawn.

This is separate from paying yourself through PAYE or taking dividends.

When does Section 455 tax apply?

If you are a shareholder in a close company and you still owe the company money, Section 455 tax can apply.

The key deadline is nine months and one day after the end of the accounting period in which the loan is made.

If you repay the loan in time, the company normally avoids the Section 455 charge on that amount. If the loan is still outstanding after the deadline, the company usually has to pay the charge to HMRC.

For loans made on or after 6 April 2026, the Section 455 rate is 35.75%. Older loans can attract different rates, which is why the calculator asks when the loan starts.

HMRC explains the rules in its Company Taxation Manual.

Example: £20,000 director’s loan

Say your company lends you £20,000 on 1 May 2026 and its accounting period ends on 31 March 2027.

The Section 455 payment deadline is 1 January 2028.

If you still owe the full £20,000 at that point, the potential charge is:

£20,000 × 35.75% = £7,150

This is a company tax charge. It does not turn the loan into salary or a dividend, and paying the tax does not wipe out the debt. You still owe the company the £20,000.

What if you repay the loan late?

If you repay the loan after the original deadline, the company may already have had to pay Section 455 tax.

That does not mean the tax is necessarily lost for good. The company can normally claim relief under Section 458 for the amount you later repay.

The relief is not immediate. It is normally tied to the accounting period in which the repayment happens.

Our calculator estimates the relief date on the assumption that your company keeps the same annual accounting date.

So if your company pays £7,150 of Section 455 tax on a £20,000 loan and you later repay the whole loan, the company may eventually recover the £7,150.

Watch out for repaying and borrowing again

You cannot simply repay a loan for a few days and then take the money back out again to sidestep Section 455.

HMRC has anti-avoidance rules for this, often called the bed and breakfasting rules. They can apply where you repay money and then borrow again shortly afterwards, or where there is already an arrangement to take another loan.

Our calculator does not try to model these rules.

If you repay an overdrawn director’s loan account and then borrow again, get your accountant to look at the transactions before assuming the Section 455 charge disappears.

Loans over £10,000 can cause another tax issue

Section 455 is not the only thing to think about.

If your total cheap or interest-free loans from the company go above £10,000 during the tax year, you can also have a taxable benefit in kind.

The tax charge broadly depends on HMRC’s official interest rate, how long the loan is outstanding and any interest you actually pay to the company.

The calculator flags this risk, but it does not try to calculate the exact benefit. That would need more information than a simple director’s loan calculator can sensibly ask for.

What if the company writes off the loan?

Writing off the loan is not the same as repaying it.

If the company simply releases the debt, you can face a personal tax charge. There may also be National Insurance consequences.

So a write-off is not a neat way of making an overdrawn director’s loan account disappear.

Important assumptions

• The calculator works with one loan and one repayment.
• The accounting period end you enter should be the period end for the period in which the loan is made.
• For a late repayment, it assumes the company keeps the same annual accounting date.
• It does not apply the 30-day or other replacement-loan anti-avoidance rules.
• It does not calculate the benefit in kind on a cheap or interest-free loan.
• It does not calculate the tax consequences of writing off a loan.

Keep an eye on the director’s loan account

The easiest way to avoid problems is to keep the account up to date during the year rather than discovering a large balance when your annual accounts are prepared.

Money you take from the company needs to be recorded properly. It might be salary, a dividend, repayment of money the company owes you, a business expense or a director’s loan. They all have different tax consequences.

Our guide to taking money out of a limited company covers the main options.

If your loan account has lots of withdrawals and repayments, stays overdrawn for more than one accounting period or you regularly repay and borrow again, ask your accountant to check it.