Director's loan accounts explained

GOV.UK describes a director's loan as money that you, or other close family members, get from your company that is not a salary, a dividend, a repayment of expenses, or money you have previously paid into or lent to the company. Companies must keep a record of these amounts, usually called a director's loan account.

In practice the account often moves both ways. A director might pay a company bill from a personal card, which the company then owes back, and later take money out ahead of a dividend, which the director then owes. The balance at the company's year end is what matters for the accounts and the tax return.

The tax depends on when and whether the loan is repaid.

Using our own arithmetic, suppose a director owes the company £20,000 at its year end, the loan was made on or after 6 April 2026, and none of it is repaid within 9 months. The company would pay £20,000 x 35.75% = £7,150 in extra corporation tax, with interest if that is paid late. If the director repays the £20,000 later, the company can reclaim the £7,150, but not the interest. HMRC says its Corporation Tax online service will not show the 35.75% rate until 6 April 2027, so a company filing before then may need to amend its return afterwards.

A loan of that size is also over £10,000, so GOV.UK says it would be treated as a benefit in kind, with Class 1 National Insurance for the company, and the director may owe tax on it at the official rate of interest. Clearing a loan by declaring a dividend is only possible if the company has available profits, and the dividend is then taxed in the usual way, as our guide to paying yourself from a limited company explains.

Directors often lend money to their own company, especially when it is new. GOV.UK says the company does not pay corporation tax on money you lend it. If you charge interest, the interest is a business expense for the company and personal income for you, to be reported on your self assessment return. The company pays the interest less Income Tax at the basic rate of 20% and reports and pays that tax to HMRC quarterly on form CT61.

A loan you have made to the company can usually be repaid to you without further tax, because it is your own money coming back, but the record needs to be clear about what was a loan and what was not.

Problems with director's loans often start with unclear records, such as personal spending on a company card or money taken out with no decision on whether it is salary, dividend or loan. Reviewing the balance before the year end, rather than after, gives more room to deal with it. The account also needs settling if the company is closed, as our guide to closing a limited company mentions, and the CT600A deadlines follow the company filing calendar. Our page on accountants for limited companies explains how an accountant can help keep the account in order, and we read every enquiry and, where we can, put you in touch with a local accountant; see how it works.