Section 455 is a type of Corporation Tax. It applies when a director or shareholder borrows money from a company and does not repay it on time. As the name implies, the rule comes from Section 455 of the Corporation Tax Act 2010.
In practice, when you take a loan from your company, you must repay it within a set time. If you miss the deadline, the company pays extra tax.
HMRC introduced this rule to prevent tax avoidance. Without it directors could take money as loans instead of salary or dividends. As a result, they would reduce their personal liability.
Your Director’s Loan Account
A Director’s Loan Account records money moving between you and your company.
It covers transactions that do not relate to:
- Salary
- Dividends
- Reimbursed expenses
It can show two positions:
| In credit | The company owes you money |
| Overdrawn | You owe the company money |
Section 455 only applies when your account is overdrawn at the end of the accounting period.
When Section 455 Applies
Section 455 applies when a loan remains unpaid after a set deadline. You must repay the loan within 9 months and 1 day of your company’s year-end.
For instance, if your year-end is 31 May 2026, the repayment deadline is 1 March 2027.
If you repay the loan before this date, no Section 455 applies. However, if any amount remains unpaid, the company must pay tax on the outstanding balance.
Additionally, indirect loans may also count. This includes funds passing through a third-party that benefit a director.
What Triggers Section 455
In practice, Section 455 often arises from everyday actions, such as:
- Using company funds for personal expenses
- Taking money before confirming profits
- Mixing personal and business spending
- Withdrawing funds without declaring dividends
These situations can easily lead to an overdrawn loan account.
Section 455 Tax Rates
The tax rate depends on when you took the loan.
| Loans before 6 April 2026 | 33.75% |
| Loans on or after 6 April 2026 | 35.75% |
This rate aligns with the higher dividend tax rate.
For example: If you owe £20,000 after the deadline, Section 455 at 33.75% equals £6,750.
This charge applies to the company, not the individual.
How and When to Pay
You pay Section 455 as part of your Corporation Tax bill.
You must:
- Report the loan on your Company Tax Return (CT600)
- Complete the CT600A supplementary pages
The payment deadline matches your Corporation Tax deadline. For most companies, this falls 9 months and 1 day after the accounting period ends.
Reclaiming Section 455
You can reclaim Section 455 once you repay the loan. However, the refund does not happen straight away. You must wait until 9 months and 1 day after the end of the accounting period in which you repaid the loan.
To reclaim:
- Use CT600A if the repayment falls within the current or recent periods
- Use the L2P form for older repayments
HMRC may take time to process refunds.
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This article is for general informational purposes only and does not constitute legal or financial advice. While we aim to keep our content up to date and accurate, UK tax laws and regulations are subject to change. Please speak to an accountant or tax professional for advice tailored to your individual circumstances. Pi Accountancy accepts no responsibility for any issues arising from reliance on the information provided.