Director's loan calculator 2026/27
Enter what the loan account owed the company at the year end, and your salary and dividends for the year, to see the s455 Corporation Tax charge, the benefit in kind if the loan is over £10,000, and what it would cost to clear it with a dividend instead. It uses 2026/27 UK rates.
2026/27 UK ratesRates checked 16/09/2026No sign-up required
Your figures
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Leave it, or clear it with a dividend
Both routes are shown at today's figures. Clearing the loan with a bonus instead would carry PAYE and National Insurance rather than dividend tax, which is a separate comparison.
Where the first-year cost falls
Built and reviewed by Luvero Accounting
- Reviewed by Dan Edwards FMAAT
- AAT licensed accountancy practice, Bawtry, South Yorkshire
- Tax rates last reviewed 16/09/2026
- How the calculators work
What this calculator works out
It takes the balance an overdrawn director's loan account owed the company at the year end and works out the s455 Corporation Tax charge if it is still outstanding 9 months and 1 day after the period ends, the benefit in kind if the loan was over £10,000 at any point, the Income Tax and Class 1A on that benefit, and the first-year cost of leaving the loan in place against clearing it with a dividend of the same amount.
How a director's loan is taxed
A director's loan account becomes overdrawn when a director takes money out of the company that is not salary, dividend or a repayment of expenses. If it is still overdrawn 9 months and 1 day after the end of the accounting period, the company pays s455 Corporation Tax on the amount outstanding: 35.75 per cent for loans made from 6 April 2026, and 33.75 per cent for loans made between 6 April 2022 and 5 April 2026. The charge is paid alongside the Corporation Tax bill for that period.
It is not gone for good. Once the loan is repaid, the s455 tax is reclaimed with form L2P, or through the CT600A on the next return, but not before 9 months and 1 day after the end of the accounting period in which the repayment falls. HMRC does not pay interest on the amount tied up in the meantime.
Bed and breakfasting rules stop a loan being repaid just before the deadline and redrawn straight after. A repayment of £5,000 or more followed by a new loan of £5,000 or more within 30 days is treated as if the original repayment never happened. The same treatment applies where, at the date of repayment, there are arrangements in place to redraw £15,000 or more, whatever the timing.
Separately, if the total the director owes the company goes over £10,000 at any point in the tax year, the loan is a benefit in kind. It is valued at HMRC's official rate, 3.75 per cent, less any interest the director actually pays, reported on the P11D, taxed on the director as employment income, and the company pays Class 1A National Insurance at 15 per cent on it.
A loan the company writes off rather than collects is treated differently again: it becomes a distribution for the director, taxed as if it were a dividend, and the company pays Class 1 National Insurance rather than Class 1A.
Worked example: £20,000 outstanding at 31 March 2026
Salary £12,570, dividends £30,000, no interest paid on the loan, 2026/27 rates.
| Loan outstanding | £20,000 |
|---|---|
| s455 at 35.75% | £7,150, due 1 January 2027 |
| Benefit in kind, £20,000 x 3.75% | £750 |
| Income Tax on the benefit | £150 |
| Class 1A on the benefit | £112.50 |
| First-year cost | £7,412.50 |
| Of which refundable once repaid | £7,150 |
Clearing the same £20,000 with a dividend instead: £7,700 of it falls in the basic rate band at 10.75 per cent, £827.75, and the remaining £12,300 in the higher rate band at 35.75 per cent, £4,397.25. Total dividend tax £5,225, paid through Self Assessment by 31 January 2028 and not refundable. The dividend route costs less overall here, but it is cash gone for good, where most of the s455 charge comes back.
Director's loan questions
What is a director's loan?
Money a director takes out of the company that is not salary, a dividend, or the repayment of a genuine business expense. It sits on the director's loan account as a balance the director owes the company. Most overdrawn accounts build up gradually, through personal bills paid from the business account or drawings taken ahead of a dividend being declared.
What is s455 tax and when is it paid?
A charge on the company, at 35.75 per cent of the loan outstanding 9 months and 1 day after the end of the accounting period, for loans made from 6 April 2026 (33.75 per cent for loans made between 6 April 2022 and 5 April 2026). It is paid with the Corporation Tax for that period. It comes back once the loan is repaid, claimed on form L2P or through the CT600A, but not until 9 months and 1 day after the end of the period in which the repayment happens.
Can I repay the loan and take it out again?
Not without care. Bed and breakfasting rules treat a repayment of £5,000 or more as never having happened if a new loan of £5,000 or more is drawn within 30 days. The same applies, regardless of timing, where arrangements already exist to redraw £15,000 or more. HMRC looks at the substance of what happened, not just the dates on the ledger.
Do I pay tax personally on a director's loan?
If the total owed goes over £10,000 at any point in the tax year, yes. The loan is a benefit in kind, valued at HMRC's official rate of 3.75 per cent less any interest you actually pay the company, and it is taxed as employment income on your P11D. Pay interest at or above the official rate and there is no benefit at all.
What happens if the company writes the loan off?
It stops being a loan and becomes a distribution. The director is taxed on it as if it were a dividend, and the s455 charge (if any was paid) is released, but the company pays Class 1 National Insurance on the write-off rather than Class 1A. Writing a loan off is rarely the cheapest way to deal with it.
Is it better to clear the loan with a dividend or a bonus?
Neither is automatically right. A dividend needs distributable reserves in the company, is taxed at dividend rates, and carries no National Insurance. A bonus is taxed as salary, through PAYE, and carries both employee and employer National Insurance, though it reduces Corporation Tax as a deduction. Both are final once paid. The s455 charge on leaving the loan outstanding is only temporary, since it is repaid once the loan is cleared. Which is cheapest depends on the company's reserves, the director's other income and the rates in force, so it is worth a conversation with your accountant rather than a rule of thumb.