We explain directors' loan accounts in plain English, handle it correctly, and make sure you claim every relief you are entitled to, all at a fixed fee.
Directors' Loan Accounts
A director's loan account tracks money you put into or take out of your company beyond salary, dividends and expenses. Overdrawing it, taking out more than you put in, can trigger tax charges for both you and the company.
We keep your director's loan account correct, warn you before an overdrawn balance triggers the section 455 charge and a benefit-in-kind, and plan repayments and dividends so you extract money efficiently and without surprises.
An overdrawn director's loan account not repaid within nine months of the year end triggers a 33.75 per cent section 455 charge for the company, and an interest-free loan over £10,000 is a taxable benefit for you. Planning avoids both.
The Detail That Matters
A director's loan account tracks money moving between you and your company beyond salary, dividends and expenses. Overdraw it, and both the company and you can face tax charges, but with timing and planning these are entirely avoidable.
If you take out more than you have put in or been credited, the account is overdrawn. If it is not cleared within nine months and one day of the company year end, the company pays a section 455 charge of 33.75% of the outstanding balance. It is refundable once you repay the loan, but HMRC holds the money in the meantime.
If your overdrawn loan exceeds £10,000 at any point, the difference between HMRC's official rate of interest and what you actually pay is a taxable benefit in kind, reported on a P11D, with Class 1A National Insurance for the company. Keeping below £10,000, or charging interest, avoids this.
An overdrawn account is usually cleared by voting a dividend (if reserves allow), paying a bonus, or repaying cash before the deadline. Beware bed-and-breakfasting rules that block simply repaying and re-borrowing around the year end to dodge the charge.
If you have lent money into the company, it can repay you tax-free, and can even pay you interest (a deductible expense for the company, taxable for you but with your savings allowances available). A well-managed loan account is a useful, legitimate planning tool.
The classic trap is drifting into an overdrawn position through regular drawings, then discovering near the year end that a 33.75% charge is looming and there are not enough reserves to clear it with a dividend.
Key Figures
How We Help
We keep an accurate record of what you put in and take out, so your director's loan account is always clear and correct.
We warn you before an overdrawn balance triggers the 33.75 per cent section 455 charge, and plan repayment or a dividend to clear it in time.
We plan how you take money from the company, salary, dividends and repayments, so you extract funds efficiently and avoid loan-account traps.
All the forms, calculations and correspondence handled on your behalf, so you never have to decode HMRC's rules or sit on hold.
A clear fixed fee quoted after a free call, your position explained in plain English, and never a surprise bill.
We act quickly, and where earlier years are involved we put those right too, reclaiming refunds or minimising penalties.
Directors often overdraw their loan account without realising the tax consequences, the section 455 charge, benefit-in-kind, and the reclaim delay. We keep it under control and plan around it.
Recent Client Outcome
A director had drawn £38,000 from their company over the year beyond salary and dividends, leaving an overdrawn loan account as the nine-month deadline approached.
What we did. We confirmed the company had sufficient distributable reserves and declared a dividend to clear the £38,000 balance before the deadline, documenting it properly, and set up a monthly review so the account would not drift overdrawn again.
The outcome. The section 455 charge of about £12,825 was avoided entirely, as was the benefit-in-kind reporting, and the dividend was taken tax-efficiently within the director's remaining basic-rate and higher-rate bands.
Acting before the deadline turned a looming five-figure tax charge into a routine, planned distribution.
Why People Come to Us
Questions Answered
Free fifteen-minute call. Fixed quote within twenty-four hours. Your return filed, every expense claimed, your bill explained, and salon VAT, payroll and accounts handled if you own a salon. Same accountant, start to finish.
Or email info@yourtaxhelp.co.uk, we typically respond within two business hours.
📅 Free consultation calls available weekdays 1pm to 3pm and 7pm to 8pm. Pick a slot that suits you.