Director's loans

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

Director's loans tax treatment

Tax implications of borrowing money from your limited company as a director.

A director's loan is money you take from your company that isn't salary, dividend, or expense reimbursement. This creates a loan account between you and your company with tax implications depending on whether you owe the company or it owes you.

Benefit-in-kind threshold: £10,000 - loans above this trigger benefit-in-kind tax if interest-free or below-market rate
Official rate of interest (2026/27): 3.75% from 6 April 2025 - interest charged below this creates taxable benefit. Rate subject to quarterly review from April 2025.
Section 455 tax: 33.75% tax on outstanding loans to participators not repaid within 9 months of company year-end (rising to 35.75% for loans advanced from 6 April 2026)
Bed and breakfasting rules: Loans repaid then re-borrowed within 30 days are treated as never repaid for S455 purposes
S455 reclaim: Company can reclaim S455 tax 9 months after the end of the accounting period when loan is repaid
Corporation tax deduction: Interest paid to director is deductible expense if at arm's length rate

Directors' loans (opens in a new tab)

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.

Legal basis

Primary legislation and key regulations

Corporation Tax Act 2010 Primary 2010 · UK-wide Income Tax (Earnings and Pensions) Act 2003 Primary 2003 · UK-wide

Browse UK legislation legislation.gov.uk

Official guidance

Claim capital allowances (opens in a new tab)

HMRC

Corporation Tax payment reference (opens in a new tab)

HMRC

Corporation Tax rates (opens in a new tab)

HMRC

Directors' loans (opens in a new tab)

HMRC

HMRC loss restriction guidance (opens in a new tab)

HMRC

If you cannot pay your tax bill on time (opens in a new tab)

HMRC

Director's loans

When loans make sense

Company lending to directors

Legal basis

Official guidance

Related guides in Tax & Finance

Close company tax rules for owner-managed businesses

How taxes work for limited companies

Register as self-employed with HMRC

Set up as a sole trader

Set up an Employee Ownership Trust