Answers · UK 2025/26

What is S455 tax on directors’ loans?

S455 tax is a 35.75% charge (for 2026/27) the company pays to HMRC when a director’s loan account is overdrawn and not repaid within nine months of the company year-end. It is refundable once the loan is repaid, but the wait can be over a year.

Last updated: 1 June 2026Last reviewed: 1 June 2026How we verify

Full answer

Section 455 (S455) of the Corporation Tax Act charges a company tax when a director or other participator borrows money from their own company and has not repaid it within nine months and one day of the company’s accounting year-end. For loans outstanding in 2026/27 the S455 rate is 35.75%, mirroring the higher dividend rate so directors cannot dodge dividend tax by taking loans instead. Worked example: a director’s loan account is overdrawn by £30,000 at the company year-end of 31 March 2027. If it is not repaid by 1 January 2028, the company must pay £30,000 × 35.75% = £10,725 in S455 tax with its corporation tax return. The good news is S455 is not a permanent cost: once the director repays the loan (or it is cleared by a dividend or bonus), the company can reclaim the S455 tax, but only nine months after the end of the accounting period in which repayment happened — so the cash can be tied up for a long time. Beware the bed and breakfasting rules, which block repaying just before year-end and re-borrowing afterwards. Separately, if the loan exceeds £10,000 at any point, it counts as a benefit in kind and triggers Class 1A National Insurance and a benefit charge on the director unless interest is paid at HMRC’s official rate. S455 applies UK-wide including Scotland. Use the Corporation Tax and Dividend Tax calculators to plan extractions that avoid an overdrawn loan.