If you owe your company £25,000 at its 31 March 2027 year end and have not repaid it by 1 January 2028, the company pays £8,937.50 of extra tax, which it can reclaim once you repay.
A director who owes their company £25,000 at its 31 March 2027 year end
| Owed to the company at 31 March 2027 | £25,000.00 |
| Still owed on 1 January 2028 | £25,000.00 |
| Section 455 tax: £25,000 at 35.75% | £8,937.50 |
| Extra corporation tax due on 1 January 2028 | £8,937.50 |
The company is a close company, and the director is a shareholder. All assumptions and rates
Assumptions and rates
- The company is a close company, and the director is a shareholder.
- The money was taken on or after 6 April 2026, and none of it is repaid by 1 January 2028.
- The company's accounting year ends on 31 March.
- Section 455 tax 35.75% on loans made from 6 April 2026
- Due 9 months and 1 day after the end of the accounting period
What is a director's loan account?
A running record of money between you and your company that is not salary, dividends or expenses. If you take out more than you have put in, the account is overdrawn and you owe the company the difference.
How do I avoid the tax?
Repay the loan within nine months of the company's year end. For a 31 March 2027 year end, anything repaid by 31 December 2027 does not attract the charge.
HMRC has rules against repaying just before the deadline and borrowing the money straight back, so a repayment that is quickly reversed may not count.
How does the company get the tax back?
Once the loan is repaid, written off or released, the company can claim the tax back from 9 months and 1 day after the end of the accounting period in which that happened. If you repay in June 2028, during the year ending 31 March 2029, the company can reclaim from 1 January 2030.
Is there tax for me personally?
If you owe more than £10,000 at any time in the year and pay less than the official rate of interest, the difference is a benefit in kind. The official rate for 2026/27 is 3.75%. A £25,000 interest-free loan held for the whole year gives a benefit of £937.50, which costs a higher rate taxpayer £375.00. The company also pays Class 1A National Insurance on the benefit.
Can I clear it with a dividend or a bonus?
Yes, if the company has the profits, but both are taxed on you in the normal way. Clearing £25,000 with a dividend that falls in the higher rate band costs £8,937.50 in dividend tax, the same 35.75% as the company's charge, and that tax is not refunded later.
Which is better depends on whether you can repay from your own money, how long the loan will be outstanding, and your tax band this year and next.
What if the company writes the loan off?
The amount written off is taxed on you as if it were a dividend. It is worth talking to an accountant before doing it, because the National Insurance and company-side treatment is not straightforward.
What this doesn’t cover
- Loans to shareholders who are not directors, or to their relatives.
- Loans made before 6 April 2026, which are charged at 33.75%.
- Companies that are not close companies.
- Companies in liquidation or administration.
- The exact anti-avoidance rules on repaying and re-borrowing.
Common questions
It is a temporary tax. The company gets it back once the loan is repaid, written off or released, though it waits nine months after that year end to reclaim it.
33.75%. The 35.75% rate applies to loans made on or after 6 April 2026.
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