This article is for you if:
You are facing a year-end director’s loan balance that has not been repaid.
You are considering repaying, clearing or writing off an overdrawn loan in 2026.
An issue has arisen about section 455 tax, a benefit in kind or the nine-month deadline.
The quick answer: an overdrawn director’s loan can affect both company and director. Key tests include the loan date, accounting-period end, whether the balance exceeded £10,000 and interest charged.
Start with the timeline
The key date is normally nine months and one day after the company’s accounting-period end—not nine months after the withdrawal or filing date.
If a close company makes a loan to a participator, commonly an owner-director, and it remains outstanding at that date, the company may owe tax under section 455 of the Corporation Tax Act 2010. HMRC’s current company-tax manual confirms a 35.75% rate for loans made or benefits conferred on or after 6 April 2026. Earlier loans can attract earlier rates.
This is a company tax charge. It does not turn the loan itself into the director’s income merely because section 455 applies.
Question | Current point to check |
|---|---|
When was the loan made? | The section 455 rate depends on the date of the loan or benefit |
When does the accounting period end? | Count nine months and one day from that date |
Was the balance above £10,000? | A cheap or interest-free loan may create a taxable benefit |
Was interest paid? | Compare it with HMRC’s official rate and payment timing |
Was the loan repaid or replaced? | Anti-avoidance rules can match repayments with new borrowing |
The £10,000 threshold is a different test
Where combined employment-related loans do not exceed £10,000 throughout the tax year, a small-loan exemption may apply. Above it, a cheap loan can create a taxable benefit and employer reporting obligations.
For 2026–27, HMRC’s official beneficial-loan rate is 3.75%. The calculation may use averaging or a more precise method.
Do not merge the tests.
The £10,000 benefit threshold does not mean a £9,999 owner-director loan is automatically free from section 455, company-law approval requirements or accounting obligations.
Repayment can create relief, but timing matters
If the loan is repaid, released or written off, the company may claim section 455 relief. HMRC’s guidance explains when relief becomes due and the claim deadline.
Repaying just before the deadline and borrowing again shortly afterwards may not work. The current CT600A guidance describes rules for repayments followed by new loans within 30 days, and arrangements to reborrow larger amounts.
Substance beats choreography.
Common complex scenarios
For each advance, track the transaction date, period end, nine-month-and-one-day point, interest, repayments and later borrowing.
You can upload an Excel ledger, CT600A working, bank statements and loan-account export to Unwildered. Caira can compare dates and flag apparent gaps or repeat borrowing. It cannot calculate your final tax liability or submit a verified return.
Situation | What needs checking |
|---|---|
Balance exceeds £10,000 briefly, then falls | The benefit test can still matter because the threshold was exceeded during the tax year; section 455 uses a separate timetable |
Running account contains advances before and after 6 April 2026 | Different section 455 rates may apply to different advances; allocate each advance and repayment before applying a rate |
Repayment is followed by new borrowing | The 30-day or arrangements rules may match the repayment with the later loan |
Interest appears only as a journal entry | HMRC’s July 2026 guidance requires actual payment; capitalising interest is not enough |
Writing off the loan is not a free reset
A release or write-off can produce income-tax and National Insurance consequences. If insolvency is near, creditor interests and recovery powers may also be engaged.
Use Unwildered for a first-pass schedule. Then test the proposed tax treatment against the loan dates, company records, approvals and current rules; keep any insolvency or company-law issue separate from the tax calculation.
Frequently asked questions
I repaid the loan for a week and took it back. Does that count?
Possibly not. The 30-day and arrangements rules may match the repayment with later borrowing. Test the full sequence, not one selected bank entry.
Is section 455 a fine?
No. It is a tax charge on the company, with possible relief after a qualifying repayment, release or write-off. Separate interest and filing consequences may also arise.
Can the company simply charge me 3.75% interest?
Charging and actually paying sufficient interest may affect the benefit calculation, but it does not remove every section 455, approval or accounting issue.
Will one mistaken personal payment trigger all these rules?
Not necessarily. Record and correct it promptly. The amount, duration, running balance and treatment in the accounts all matter.
Should I amend the accounts myself?
Keep the source evidence unchanged. Identify whether the error affects the accounts, payroll, benefits reporting or Corporation Tax return, and make only the correction supported by that evidence.
This article is general information, not legal, financial, tax or medical advice. Tax rates and guidance can change, and the result depends on your dates and facts.
