Director's loans

Director's loans and tax implications

Tax rules when company directors borrow money from or loan money to their limited company.

Tax-free loan limit: £10,000 or less - no tax consequences
Interest-free loan tax: Benefit in kind charge if over £10,000 and interest-free
Section 455 tax: 33.75% tax if loan over £10,000 not repaid within 9 months of year-end
Record keeping: All loans must be properly documented in company records

Director's loans can provide short-term flexibility for company finances. However, large or long-term loans over £10,000 can trigger significant tax charges. The 33.75% Section 455 tax is refundable once the loan is repaid, but ties up cash flow.

Director's loans guidance

When loans make sense

Short-term loans (a few months) to cover personal expenses can be tax-efficient. But for regular income needs, salary or dividends are usually better than repeated loans and repayments.

Company lending to directors

If your company lends you money, the same rules apply. Loans over £10,000 trigger benefit in kind charges if they're interest-free or below HMRC's official rate.

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Director's loans

When loans make sense

Company lending to directors

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When loans make sense

Company lending to directors

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