{"id":229,"date":"2021-02-15T02:36:07","date_gmt":"2021-02-15T02:36:07","guid":{"rendered":"https:\/\/guide.no-worries.co.uk\/?post_type=ht_kb&p=229"},"modified":"2026-06-15T06:29:40","modified_gmt":"2026-06-15T05:29:40","slug":"taking-a-loan-from-your-company","status":"publish","type":"ht_kb","link":"https:\/\/guide.no-worries.co.uk\/index.php\/knowledge-base\/taking-a-loan-from-your-company\/","title":{"rendered":"Taking a loan from your company"},"content":{"rendered":"\n

We have produced this quick guide to explain the benefits and obligations involved in taking a loan from your company.<\/p>\n\n\n\n

A director may take a loan advance from their own company, provided the company is not in financial difficulty and the loan complies with the company’s articles and the Companies Act 2006.<\/p>\n\n\n\n

The key thing to remember is that the loan must be repaid to the company.<\/p>\n\n\n\n

There are two separate issues to be aware of, and it helps to keep them apart in your mind:<\/p>\n\n\n\n

    \n
  1. The benefit-in-kind charge. This is a personal income tax issue, and it only applies to loans over \u00a310,000. You can avoid it by paying interest to the company.<\/li>\n\n\n\n
  2. The S455 charge. This is a company corporation tax issue, and it applies to any unpaid loan still outstanding nine months after your company year-end. You avoid it by repaying the loan in time.<\/li>\n<\/ol>\n\n\n\n

    These are independent. A loan can trigger one, both, or neither.<\/p>\n\n\n\n

    1: Loan less than \u00a310,000<\/h3>\n\n\n\n

    This is the simplest scenario. There is no benefit-in-kind charge on a loan of \u00a310,000 or less, so it is a straightforward way to access company funds in the short term.<\/p>\n\n\n\n

    To pay yourself a loan:<\/p>\n\n\n\n

    a) Transfer the required sum to your personal bank account, using the payment reference ‘Directors Loan’.
    b) Record the payment on the Take Home Payments page of your online account. Select the bank account it was paid from, the date paid, set the payment type to ‘Directors loan’, and enter the amount.<\/p>\n\n\n\n

    You still need to repay the loan within nine months of your company year-end (see Important 1 below), or a S455 charge can apply even on smaller loans.<\/p>\n\n\n\n

    2: Loan greater than \u00a310,000<\/h3>\n\n\n\n

    HMRC treats a loan of more than \u00a310,000 as a personal taxable benefit (a benefit in kind). Note that the whole loan is assessed, not just the amount above \u00a310,000.<\/p>\n\n\n\n

    To remove the benefit-in-kind charge, you pay your company interest on the loan balance, from your personal bank account, at HMRC’s official rate of interest. The current official rate is 3.75% (from 6 April 2025). You can check the latest rate here<\/a>.<\/p>\n\n\n\n

    Worked example: a \u00a320,000 loan outstanding for a full tax year at 3.75% means \u00a3750 of interest paid to the company for the year. Paying that interest removes the benefit-in-kind charge entirely.<\/p>\n\n\n\n

    We suggest the interest is calculated and paid annually for each personal tax year the loan is outstanding (i.e. to 5 April each year). It is worked out on the average loan balance for the year, and we are happy to do this calculation for you, just ask.<\/p>\n\n\n\n

    You will also need a loan agreement between yourself and the company recording the loan details and the interest to be paid. We can help you prepare this too.<\/p>\n\n\n\n

    Important<\/span><\/strong>: Repayment Deadline<\/strong><\/mark><\/h4>\n\n\n\n

    The loan must be repaid into your business bank account within nine months and one day of your company year-end.<\/p>\n\n\n\n

    Example: your company year-end is 30 June 2025. Any director’s loan outstanding at that date must be repaid by 1 April 2026 (nine months and one day later) to avoid a S455 charge.<\/p>\n\n\n\n

    You can find your year-end date under ‘Company registration info’ on your ‘Business info’ page.<\/p>\n\n\n\n

    We cannot submit your Annual Accounts to HMRC until either (a) the loan has been repaid and confirmed, or (b) you confirm you will not be repaying it within the nine-month window (see Important 2).<\/p>\n\n\n\n

    Important<\/span>: The S455 Charge<\/mark><\/strong><\/h4>\n\n\n\n

    If the loan is not repaid within nine months of the company year-end, the company must pay a S455 charge of 33.75% of the loan balance outstanding at the year-end.<\/p>\n\n\n\n

    Worked example: a \u00a320,000 loan still outstanding nine months after year-end results in a S455 charge of \u00a36,750.<\/p>\n\n\n\n

    This tax is temporary. It is refunded to the company once the loan is repaid, but the timing is slow: the refund is not due until nine months after the end of the accounting period in which the loan is repaid. In practice that can mean the money is tied up with HMRC for a long time, so it is far better to repay the loan on time.<\/p>\n\n\n\n

    The S455 charge is paid on the company’s normal corporation tax due date. If you do not intend to repay your loan within nine months of year-end, please tell us so we can include the charge in your Corporation Tax return.<\/p>\n\n\n\n

    3: Bed and breakfasting<\/h3>\n\n\n\n

    Rules introduced on 20 March 2013 prevent director-shareholders from having indefinite use of company money without a tax charge. If you repay a loan only to take it out again shortly after, HMRC can ignore the repayment, meaning the 33.75% S455 charge still applies.<\/p>\n\n\n\n

    The 30-day rule (loan balances of \u00a35,000 or more): if you repay \u00a35,000 or more and then withdraw the same amount again within 30 days, the repayment is matched to the later withdrawal on a first-in-first-out basis. The original loan is not treated as repaid.<\/p>\n\n\n\n

    The replacement rule (loans of \u00a315,000 or more): if you repay at least \u00a35,000 against a loan of \u00a315,000 or more but intend to withdraw a similar amount again later, the repayment is matched against the later withdrawal rather than treated as a genuine repayment.<\/p>\n\n\n\n

    To avoid being caught by these rules and a S455 charge:<\/p>\n\n\n\n

    a) For a loan under \u00a35,000, these rules do not apply.
    b) For a loan under \u00a315,000, arrange temporary funding to repay the loan before the S455 charge arises, then withdraw again once 30 days have passed.
    c) For a loan of \u00a315,000 or more, unless you repay it without using any temporary funding, the S455 charge will apply.<\/p>\n\n\n\n

    <\/p>\n","protected":false},"excerpt":{"rendered":"

    We have produced this quick guide to explain the benefits and obligations involved in taking a loan from your company. 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