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
Director's loans
Tax implications when directors borrow from or loan money to their limited company.
UK-wide
Guide summary
If you take money from your company that isn't a salary, dividend, or expense repayment, it's a director's loan. You must pay tax if the loan is over £10,000 or not repaid within 9 months of your company's year-end. Always charge interest at or above HMRC's official rate to avoid extra tax charges.
- Repay loans within 9 months of company year-end to avoid 33.75% tax
- Charge interest at or above HMRC's official rate (3.75% from April 2025)
- Loans over £10,000 trigger benefit-in-kind tax if interest-free
- Avoid re-borrowing repaid money within 30 days
- Company can reclaim tax 9 months after loan repayment
- Use salary or dividends for regular income needs
- Interest paid to director is tax-deductible at market rate
- Same rules apply when company lends to director
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UK-wide
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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.