What is Directors Loan? UK Definition 2026/27
Quick Answer
Money borrowed from or lent to your company as a director/shareholder.
Definition of Directors Loan
A directors loan is money borrowed from your limited company or money you lend to it. Loans to directors above £10,000 create a benefit-in-kind. If the company lends you money and it remains outstanding 9 months after year-end, Section 455 tax (33.75%) is charged on the company. This is refunded when the loan is repaid.
Directors Loan — Key Facts for 2026/27
| BIK threshold | £10,000 |
| Section 455 rate | 33.75% |
| S455 deadline | 9 months after year-end |
| Official interest rate | 2.25% |
How Directors Loan Works — Example
- 1Loan from company: £20,000
- 2Year-end: 31 March 2026
- 3S455 deadline: 1 January 2027
- 4If not repaid: Company pays £6,750 (33.75%)
- 5When repaid: S455 refunded to company
How Directors Loan Affects Your Tax
Directors loans can provide cash flow flexibility but have tax consequences. The Section 455 charge is a significant deterrent to long-term borrowing. Consider alternatives like dividends or salary for extracting funds.
Official HMRC Guidance on Directors Loan
For official guidance, refer to HMRC's documentation. Tax rules can change, so always verify current rates and thresholds on gov.uk.
HMRC: Directors loansFrequently Asked Questions about Directors Loan
Related Tax Terms
Accuracy Note
This information is for guidance only and is based on 2026/27 tax year rates. Tax rules are complex and your circumstances may differ. For personal advice, consult a qualified accountant or tax adviser.