What is a director's loan account in the UK?

Full answer

A **Director's Loan Account (DLA)** is a bookkeeping record that tracks all financial transactions between a company director and their limited company — other than salary, dividends or expenses. **Credit DLA (company owes you):** If you have personally lent money to your company (e.g. contributed capital beyond your share capital), the DLA has a **credit balance** — the company owes you. You can withdraw this tax-free at any time as it is repayment of your own loan. You may also charge the company interest (up to the commercial rate), which is deductible for CT but taxable as your personal income. **Debit DLA (you owe the company):** If you have withdrawn more than you have put in (via drawings, personal expenses paid by the company, etc.), the DLA has a **debit balance** — you owe the company. **£10,000 benefit-in-kind threshold:** If the debit balance exceeds **£10,000** at any point during the tax year and the company charges no interest (or less than the **HMRC official rate** — **2.25% in 2026/27**), a **benefit-in-kind** arises on the notional interest. The BIK is reported on Form P11D; both employee NI (Class 1A) and income tax apply. **S455 Corporation Tax charge:** If a debit DLA balance has **not been repaid** within **9 months and 1 day** of the company's accounting period end, the company must pay an **S455 charge** to HMRC equal to **35.75%** of the outstanding loan balance. This charge is repayable once the loan is repaid — HMRC refunds it 9 months after the end of the accounting period in which the loan is cleared. **Bed-and-breakfasting rule:** You cannot repay the DLA just before the 9-month deadline and immediately re-borrow to avoid S455 — HMRC has anti-avoidance provisions (30-day rule for re-borrowing over £5,000). **Dividend vs loan strategy:** Most owner-managed company directors use a combination of minimum salary + dividends rather than large loans to extract value tax-efficiently.

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