Glossary · UK
What is Director's Loan Account (DLA)?
A record of money a director borrows from or lends to their own limited company that does not constitute salary, dividends, or reimbursed expenses.
Full Definition
A Director's Loan Account (DLA) is an accounting record maintained for each director of a limited company, tracking any money paid out to the director that is not salary, dividend, or reimbursement of genuine business expenses, and any money the director personally lends to the company. When a director takes more money out of the company than they have put in (an overdrawn DLA), this creates a loan from the company to the director. This is not automatically taxable income, but it triggers two important tax consequences. First, if the overdrawn DLA is not repaid within nine months and one day of the end of the accounting period in which it arose, the company must pay a Section 455 Corporation Tax charge of 33.75% of the outstanding balance (matching the higher rate dividend tax rate). This S455 tax is refunded to the company nine months after the end of the accounting period in which the loan is repaid. Second, if the loan exceeds £10,000 at any point during the tax year and interest below the official rate (currently 2.25% per annum for 2025/26) is charged, a benefit in kind arises, reportable on a P11D and subject to Income Tax for the director and Class 1A NICs for the company. Careful planning around DLAs -- including crediting declared dividends to the account, repaying before the nine-month deadline, or converting to formal salary -- can avoid these charges.