Close company tax rules for owner-managed businesses
What close company status means for your tax obligations, including Section 455 tax on director's loans.
Funding options for your business
UK-wide
Director's loans
Tax implications when directors borrow from or loan money to their limited company.
Guide summary
Record any money you take from your company that is not salary, dividend, or expense repayment as a director's loan. If the loan is over £10,000 and interest-free or below 3.75%, report the taxable benefit. Pay 33.75% tax (Section 455) on loans not repaid within 9 months of your company's year-end.
- Record all loans from your company that are not salary, dividend or expenses
- Report taxable benefit if loan over £10,000 and interest below 3.75%
- Pay 33.75% Section 455 tax on loans unpaid after 9 months from year-end
- Rate rises to 35.75% for loans made from 6 April 2026
- Repay and re-borrow within 30 days treated as never repaid for tax
- Reclaim Section 455 tax 9 months after the loan is repaid
- Interest paid to you is a tax-deductible company expense at arm's length
- Short-term loans can be tax-efficient but salary or dividends suit regular income
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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.