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Home › Tax glossary › Director's loan account
UK tax glossaryUpdated October 2026What is a director's loan account?
A plain-English explanation from Cangaf's ACCA-qualified accountants, with the 2026/27 rules.
Director's loan account in briefA director's loan account (DLA) records money that moves between a director and their limited company that isn't salary, dividends or expense repayments. If you owe the company money at the year end and don't repay it within 9 months and 1 day, the company pays S455 tax, which is 35.75% on loans made from 6 April 2026.
Key facts
| What goes in it | Personal spending paid by the company, money you lend the company, and repayments |
| Overdrawn DLA | You owe the company money |
| S455 tax | 35.75% of the overdrawn balance not repaid within 9 months and 1 day of the year end (33.75% on older loans) |
| Benefit in kind | Loans over £10,000 at any point that are interest-free or cheap can be a taxable benefit |
How an overdrawn DLA happens
It usually builds up when you take money out of the company without declaring salary or dividends, or the company pays personal bills. It's common in small companies, but it needs managing before the year end.
Getting S455 back
S455 tax is refunded once the loan is repaid or written off, but only nine months and one day after the end of the accounting period in which it was cleared. So it can tie up cash for a long time.
Clearing the balance
You can repay in cash, declare a dividend if the company has enough profits, or pay a bonus through payroll. Repaying and re-borrowing within 30 days to dodge S455 doesn't work, as anti-avoidance rules apply.
Common questions
Is it illegal to have an overdrawn director's loan account?
No. It's allowed, but it has tax consequences: S455 tax if not repaid in time, and possibly a benefit in kind. Shareholder approval is needed for loans over £10,000.
What if the company owes me money?
That's a credit balance. You can take it out tax-free at any time, as it's your own money being repaid. If the company pays you interest, that's taxable income for you.
Can a loan be written off?
Yes, but the amount written off is taxed on you as a dividend, and National Insurance may also be due. We check the cheapest way to clear it.
Official guidance: Director's loans (GOV.UK)
