Director’s loan account at year end: section 455 and the 9-month rule

A director’s loan account records money you take from the company that isn’t salary, dividends or expenses, and money you pay in. If you owe the company at the year end, you have 9 months and 1 day to repay it before the company has to pay extra tax.

Last checked against GOV.UK on 2 November 2026.

A4O Accounts files your accounts and CT600 from the same figures. Get started free, no card required.

Check the balance at the year end

Keep a record of everything you borrow from or pay into the company. Start with the balance on the year-end date, because the rest follows from which way it falls.

Personal bills paid by the company and money taken without being treated as salary or dividends can push the account overdrawn, so check for these before you rely on the figure. See what’s on a small company balance sheet.

The 9-month rule

Section 455 applies when a close company lends money to a participator, usually a director who is also a shareholder. Most owner-managed companies are close companies.

Show the amount owed at the end of the accounting period on form CT600A with your Company Tax Return. What happens next depends on when the loan is cleared.

The tax falls due on the same day as the company’s Corporation Tax: for a 31 December 2026 year end, that’s 1 October 2027. See Corporation Tax deadlines.

The rates

The rate follows the date the loan was made, not the date of the year end. It matches the dividend upper rate for the tax year of the loan.

GOV.UK’s director’s loans guide still shows 33.75% as we write this. The 35.75% rate comes from HMRC’s Company Taxation Manual. HMRC’s online service isn’t expected to handle it until 6 April 2027: see CT600A explained.

A worked example

A company with a 31 December 2026 year end lent its director £20,000 in June 2026, and the whole amount is still owed at the year end. The director repays £12,000 by 1 October 2027.

If the director repays the last £8,000 in December 2027, relief falls in the period ending 31 December 2027. It’s due on that period’s payment date, 1 October 2028, so the company waits about a year for the £2,860. The claim has to be made within 4 years of the end of the Corporation Tax financial year (1 April to 31 March) in which the loan is repaid.

Ways to clear the loan

• Pay it back from your own money.
• Vote a bonus or salary and credit it to the loan account. It goes through payroll, so Income Tax and National Insurance are due: see payroll for a one-director company.
• Declare a dividend and credit it to the loan account, if the company has enough profits to pay one. You may have personal tax on the dividend.
• Write it off. The company doesn’t pay the section 455 tax on the amount released, but it’s taxed on you: see below.

Compare the cost before you choose. Section 455 tax comes back after repayment, but salary, dividend and write-off taxes don’t.

Repaying and borrowing again

Repaying just before the deadline and taking the money straight back out doesn’t work. GOV.UK says the company still pays the tax on the original loan if:

• the loan was more than £5,000, and you took another loan of £5,000 or more up to 30 days before or after repaying it
• the loan was more than £15,000, and you arranged another loan when you repaid it

The company can reclaim the tax once the original loan is permanently repaid.

Your own tax

The rest of this is about the director’s position, not the company’s.

A loan of more than £10,000. If you’re a shareholder and director and owed more than £10,000 at any time in the tax year, the loan is treated as a benefit in kind unless you paid interest that takes it outside the rules. The company reports it on a P11D and pays Class 1A National Insurance, and you report it on your Self Assessment return. The benefit is worked out using HMRC’s official rate of interest, which is 3.75% for the 2026 to 2027 tax year, the same as the year before.

Interest below the official rate. The company records the interest you pay as income, and the shortfall is a benefit in kind.

A loan written off. The company deducts Class 1 National Insurance through payroll and reports the amount on a P11D. You pay Income Tax on it through Self Assessment.

Loans of more than £10,000 need members’ approval

Under the Companies Act, a company needs a resolution of its members before lending to a director, unless the total doesn’t exceed £10,000. In a company with one director and shareholder, that’s still a decision to record, along with the loan’s purpose, amount and terms.

If the company owes you

Money you lend to the company has no Corporation Tax consequences for the company. If you charge interest:

• it’s a business expense for the company and personal income for you, reported on your Self Assessment return
• the company pays you the interest less Income Tax at 20%, and reports and pays that tax each quarter using form CT61

At the year end

Check the balance when you post your year-end journals, then make a decision while there’s still time to act. For a 31 March 2026 year end, the 9 months and 1 day end on 1 January 2027. The year-end checklist shows where this fits.

In A4O Accounts

You add a CT600A to the return from its tax computation and enter the loans, and the tax is carried into the CT600. A4O Accounts currently works the section 455 tax out at 33.75%, so for a loan made on or after 6 April 2026, check the figure against the rate above before you file. See CT600 software.