Directors Loan Calculator, 2026/27

How this is calculated

Where a director who is also a shareholder takes money from the company beyond salary or dividends, and it is not repaid within nine months of the company's year end, the company must pay section 455 tax at 35.75% of the outstanding balance, the same rate as the dividend upper rate. This is a temporary tax: it is repaid by HMRC once the loan is cleared, though there can be a delay before repayment.

Separately, if the loan exceeds £10,000 and interest is charged below HMRC's official rate of interest, currently 3.8%, the shortfall is treated as a taxable benefit in kind on the director personally, reportable on the P11D, with employer Class 1A NIC also due on the same benefit.

This calculator applies both charges independently: the section 455 tax depends only on whether the loan is repaid within nine months of the year end, while the interest benefit depends on the loan size and the rate of interest actually charged, regardless of repayment timing.

Repayment and 'bed and breakfasting'

If the loan is repaid before the nine-month deadline, no section 455 tax is due at all. If it is repaid later, the tax is due but reclaimable once repayment happens, using form L2P or via the company's tax return.

HMRC has specific anti-avoidance rules against repaying a loan shortly before the deadline and redrawing a similar amount shortly afterwards, sometimes called bed and breakfasting. Where more than £10,000 is repaid and a new loan of £5,000 or more is taken out within 30 days, or there was an intention to redraw the funds when the repayment was made, the repayment can be disregarded for section 455 purposes.

Keeping the loan account clean

Directors should keep clear records of drawings, salary, dividends and any genuine loan repayments, since HMRC will look at the loan account as a whole across the year rather than just the year-end snapshot when reviewing whether the rules have been followed properly.

Where dividends are intended to clear an overdrawn loan account, they must be properly declared with dividend vouchers and board minutes, and there must be sufficient distributable reserves; an informal book entry is not enough to avoid section 455 tax.

What happens if I don't repay my director's loan?

If it remains outstanding nine months after the company's year end, the company pays section 455 tax at 35.75% of the balance. This is refundable once the loan is eventually repaid, but the cash cost hits in the meantime.

Is there a tax-free amount I can borrow from my company?

There is no tax-free amount for section 455 purposes; any outstanding loan is in scope. However, loans of £10,000 or less do not create a taxable interest benefit even if interest-free.

Can I just repay the loan and borrow it again?

HMRC's anti-avoidance rules can disregard a repayment for section 455 purposes if a similar amount is redrawn shortly afterwards, particularly where more than £10,000 is repaid and £5,000 or more is redrawn within 30 days.

Does the loan show up anywhere in my personal tax return?

The interest benefit in kind, if any, is reported on your P11D and included in your self assessment. The section 455 tax itself is a company liability reported on the CT600, not directly on your personal return.