Director's Loan Account (DLA) Calculator
Calculate Section 455 tax, repayment deadlines, beneficial loan benefit-in-kind, and P11D liability — 2026/27
Last updated: March 2026
Director's Loan Account (DLA) Calculator 2026/27
Calculate your S455 tax, P11D beneficial loan benefit, and optimal repayment strategy
Director's Loan Account — Key Rules 2026/27
S455 Tax Rates and Thresholds
| Item | Rate / Amount | Note |
|---|---|---|
| S455 tax rate | 33.75% | Aligned to higher rate dividend tax |
| Beneficial loan threshold | £10,000 | P11D required if exceeded |
| HMRC official interest rate | 2.5% | 2026/27 rate — used for P11D calculation |
| Class 1A NIC rate | 13.8% | Employer — due 19 July after tax year |
| S455 payment deadline | 9 months + 1 day | After company accounting period end |
Expert Guide: Director's Loan Accounts — 7 Essential Rules for 2026/27
1. How the S455 Tax Mechanism Works
Section 455 of CTA 2010 imposes a tax charge on a close company (broadly, one controlled by 5 or fewer shareholders) when a participator or their associate has an overdrawn loan account that remains outstanding 9 months and 1 day after the company's accounting period ends. The rate is 33.75% — aligned to the higher rate dividend tax band. This was increased from 32.5% in April 2022, following the increase to the higher rate dividend tax, and reflects the principle that an overdrawn DLA is economically equivalent to an undeclared dividend.
The S455 charge is temporary — it is sometimes called a "temporary tax" — because when the director repays the loan to the company, HMRC repays the S455 tax. However, the repayment is not immediate: HMRC pays back the S455 9 months after the end of the accounting period in which the repayment occurs. This delay creates a significant cash flow cost. A company that pays S455 in January 2027 and has the director repay in August 2027 (during the year ending March 2028) would not receive the S455 refund until January 2029 — a two-year gap between payment and refund.
2. The £10,000 Threshold and Beneficial Loan P11D
If a director's loan account exceeds £10,000 at any point during the tax year, and the loan is either interest-free or charged at below the HMRC official rate (2.5% for 2026/27), a benefit-in-kind arises. The benefit must be reported on form P11D and is subject to income tax for the director. The company must also pay Class 1A NIC at 13.8% on the P11D value. The P11D filing deadline is 6 July following the tax year. Class 1A NIC is due by 19 July (or 22 July for electronic payment).
The P11D value is calculated as: average loan balance during the tax year × HMRC official rate. If the director charged interest at 1% and the official rate is 2.5%, the P11D benefit is the difference (1.5%) × average balance. A director who keeps their loan below £10,000 throughout the entire tax year avoids the P11D benefit-in-kind entirely — a valuable planning consideration. However, even a brief period above £10,000 during the year triggers the P11D requirement.
3. Repaying the DLA — The Most Tax-Efficient Option
For many directors with a modest overdrawn DLA, the most cost-effective strategy is simply to repay the loan before the 9-month S455 deadline. The total cost is zero — no S455, no P11D (if kept below £10,000). The challenge is finding the cash to make the repayment. Options include: drawing a dividend (if distributable reserves exist), taking a salary bonus (subject to PAYE/NIC), or personally funding the repayment from savings.
Directors sometimes use their future dividend entitlement to offset the DLA balance — but this only works if the company has sufficient distributable reserves (retained profits) at the time the dividend is declared. A dividend cannot be paid from anticipated future profits. The minutes of the board meeting declaring the dividend should clearly link it to the reduction or clearing of the DLA where this is the intention.
4. The 30-Day Bed and Breakfasting Anti-Avoidance Rule
HMRC's 30-day rule prevents directors from making a token repayment of the DLA immediately before the 9-month S455 deadline and then immediately re-borrowing the same amount from the company. Under CTA 2010 s.464C, if within 30 days of a repayment being made, the company makes a new loan to the same director (or associate) of £5,000 or more, HMRC can match the repayment against the new loan and treat the original loan as still outstanding for S455 purposes.
A more sophisticated version of this rule also applies where: a repayment is made of more than £5,000, and the director draws fresh funds from the company more than 30 days later but with an arrangement having been entered into at or before the time of the repayment. This "arrangements" limb catches pre-planned schemes where the repayment is made but the director always intended to re-borrow. The key test is whether the repayment was genuine and not part of an arrangement to avoid S455.
5. Write-Off vs Repayment — The Income Tax Trap
Some accountants recommend that a company simply writes off (forgives) the director's overdrawn loan account to avoid the complexity of repayment. However, this triggers significant personal tax consequences for the director. A written-off DLA is treated as employment income (not a dividend), and the director must pay income tax and Class 1 National Insurance on the full amount.
Example: A director's £30,000 DLA is written off. At higher rate: income tax = £30,000 × 40% = £12,000. Employee NIC at 2% = £600 (above £50,270 threshold). Employer NIC at 15% on £30,000 = £4,500. Total cost: £17,100 — compared to S455 of £30,000 × 33.75% = £10,125 (but S455 is refundable). Write-off is usually more expensive than either repayment or simply accepting the S455 charge. The S455 tax, while large, is ultimately recovered when the director repays — a write-off produces an irrecoverable income tax and NIC cost.
6. Dividend vs Loan — Long-Term Strategy for Owner-Directors
The optimal strategy for owner-directors is to align cash drawings with declared dividends in real time, avoiding a large overdrawn DLA altogether. Many owner-directors draw cash informally throughout the year (debiting the DLA) and then retrospectively declare a dividend at year-end to clear the account. This works provided distributable reserves exist at year-end and the dividend is properly declared (board minute, dividend voucher, correct bookkeeping). If reserves are insufficient to cover the full DLA balance, the remaining overdrawn amount is subject to S455.
Chartered accountants often use interim dividend vouchers throughout the year to clear the DLA as drawings occur. This approach requires careful bookkeeping but avoids any year-end DLA balance. Monthly or quarterly accounting reviews can identify DLA balances before they become problematic, allowing timely dividend declarations or genuine repayments. Proactive DLA management is far preferable to dealing with the S455 aftermath.
7. HMRC's DLA Clearance Procedure
In complex cases — particularly restructurings, insolvency scenarios, or large loans with unusual terms — directors and their advisers can seek advance clearance from HMRC under the Transactions in Securities provisions or the general non-statutory clearance procedure. HMRC's Clearance and Counteraction Team (CCT) will confirm their view of how specific transactions should be treated for tax purposes.
Clearance applications should include: a full description of the proposed transaction, the commercial reasons for it, the relevant legislation being considered, and whether the same or substantially similar transaction has been refused clearance before. HMRC aims to respond within 28 days for straightforward applications and 45 days for complex ones. While clearance is not legally binding in all circumstances, it provides significant protection against HMRC later seeking to apply an alternative tax treatment.
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Expert Reviewed — S455 rules per CTA 2010 s.455–464. P11D beneficial loan rules per ITEPA 2003 s.175–191. Last verified: March 2026.