Will I pay tax on my director’s loan?

If you take a loan from your company and you pay no interest on it or it is lower than HMRC’s official interest rates (currently 3.75% for 2026/27), you may have to pay income tax on the benefit-in-kind of having received an interest-free or low-interest loan. Separately, your company may also need to pay corporation tax on the director’s loan in some instances. 

Are there any exemptions from income tax on directors’ loans? 

There are a few instances when you could avoid a tax charge, but the main one to take note of is if the balance on your director’s loan has not exceeded £10,000 at any point during the tax year. 

If the loan has exceeded £10,000 at any point, a tax charge will arise unless you pay the company interest at or above HMRC’s official interest rate. You can pay this interest after the end of the tax year and still avoid a benefit-in-kind arising but only if the interest rate was a pre-existing obligation of the loan. You can’t ‘voluntarily’ pay interest at a later date to avoid a benefit-in-kind tax charge. 

What are ‘loans to participators’ tax charges? 

In addition to your personal tax charge, the company may be hit with a corporation tax charge under the loans to participators rules if your director’s loan account is still overdrawn nine months after the end of the company’s accounting period. Also known as s455 tax, this is a refundable charge of 33.75% of the balance on the loan at the end of the accounting period. It is a very effective deterrent to stop companies from loaning money to their directors indefinitely. 

Please note, we have assumed that your director’s loan account was nil at the beginning of the year. 

If you would like any advice regarding your director's remuneration package, director’s loan account or benefits-in-kind, please contact TaxAssist Accountants on 01752 551 888 or our online contact form.  

Last updated 16 Jul 2026 | First published 1 Jun 2018

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This article is intended to inform rather than advise and is based on legislation and practice at the time. Taxpayer’s circumstances do vary and if you feel that the information provided is beneficial it is important that you contact us before implementation. If you take, or do not take action as a result of reading this article, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.

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