# A director has overdrawn the loan account: the section 455 charge at 35.75%, the nine months and one day deadline, worked

> A director's overdrawn loan account can cost the company tax from 1 January 2028. £18,000 owed at 35.75% is £6,435; repaying £12,000 first cuts it to £2,145.

- Page to cite: https://aeolookup.com/accountants/director-loan-overdrawn-account-section-455-35-75-percent-nine-months-one-day-worked/
- Publisher: AEO Lookup (https://aeolookup.com/)
- Section: Accountancy practices, Deadlines and penalties
- Published 9 October 2026
- Key fact: A director whose company has a 31 March year end draws £18,000 on 1 November 2026 and still owes it on the due date. The loan was made in the accounting period ending 31 March 2027, so the charge is due on 1 January 2028 (nine months on, plus a day). At the 35.75% dividend upper rate for 2026 to 2027 it is £6,435; repaying £12,000 first leaves £6,000 and a charge of £2,145. Had the loan been made in 2025 to 2026 at 33.75%, the same £18,000 would have cost £6,075.
- Sources: legislation.gov.uk, Corporation Tax Act 2010 section 455 (charge at the dividend upper rate for the tax year in which the loan is made; due on the day following the end of nine months from the end of the accounting period in which the loan was made); GOV.UK, Tax on dividends (2026 to 2027 higher rate 35.75%). The page read did not state a separate section 455 percentage, so the 35.75% is read across from the dividend upper rate the Act names. Read 9 October 2026.

A director draws £18,000 from the company in November to cover a deposit. It is not salary, and no dividend was declared, so the bookkeeper posts it to the director's loan account. Nothing happens for months. Then the year-end accounts are prepared, the balance is still there, and the company has a tax charge the director did not expect.

## The rule in the Act

Section 455 of the Corporation Tax Act 2010, on legislation.gov.uk, charges a close company that makes a loan or advance to a participator (a director who holds shares is the usual case). Two things in it matter.

**The date.** The tax is due "on the day following the end of the period of 9 months from the end of the accounting period in which the loan or advance was made". Counted from a year end, that is nine months and one day.

**The rate.** The charge corresponds to the dividend upper rate in section 8(2) of the Income Tax Act 2007 for the tax year in which the loan is made. GOV.UK's page on tax on dividends gives that upper (higher) rate as **35.75%** for 6 April 2026 to 5 April 2027. The legislation page I read does not print a percentage, so the figure is read across from the dividend rate it names. For a loan made in 2025 to 2026, the rate was 33.75%, as the [dividend tax guide](https://aeolookup.com/accountants/dividend-tax-2026-27-director-10-75-percent-worked/) shows for last year.

The company pays this charge, not the director. It is paid on the loan still outstanding at the due date.

## One director worked through

A company with a 31 March year end. The director draws £18,000 on 1 November 2026.

1. The loan is made in the accounting period 1 April 2026 to 31 March 2027.
2. Nine months from 31 March 2027 is 31 December 2027, so the charge falls due on **1 January 2028**.
3. If the full £18,000 is still owed then: £18,000 × 35.75% = **£6,435**.
4. If the director repays £12,000 before that date, £6,000 is outstanding: £6,000 × 35.75% = **£2,145**.
5. If the same £18,000 had been drawn in 2025 to 2026 and left in place: £18,000 × 33.75% = £6,075.

| Outstanding at the due date | Charge at 35.75% |
|---|---|
| £18,000 | £6,435 |
| £12,000 | £4,290 |
| £6,000 | £2,145 |
| £0 | £0 |

## What to ask the client

- **What is the year end?** The clock runs from the end of the accounting period of the loan, not from the day the money left. A loan made the day after a year end gets almost 21 months before the charge falls due; one made on the last day gets nine.
- **Can it be cleared?** A salary, bonus or dividend that is properly declared, or a repayment from the director's own funds, reduces the balance. A dividend brings its own tax, so set the section 455 saving against the dividend tax at the rates in the guide above. This guide does not cover repaying the loan and borrowing again soon after; I did not read HMRC's position on it, so check before you advise.
- **Has the loan account been looked at during the year?** A mid-year check costs minutes. The same discovery at the due date costs a charge.

I also did not read on this occasion the rules on a refund of the charge after repayment, or the separate benefit-in-kind position on larger loans. Both exist in HMRC guidance; read them before you quote a figure.

If a company's return is late the penalties are separate, set out in our guide to [CT600 late filing penalties](https://aeolookup.com/accountants/company-tax-return-late-filing-penalties-ct600-accountants/). A client with a profit near the small profits limit should also see the [marginal relief worked examples](https://aeolookup.com/accountants/corporation-tax-marginal-relief-50000-250000-associated-companies-worked/).

Overlyft ![](https://aeolookup.com/img/d/ours-badge.png) builds AI staff who join your practice team and read each director client's loan account at month end, flag a balance and the date its charge would fall due, and prepare a short note for you to review before it goes to the client.

This is general information, not tax advice. Check the legislation, GOV.UK and the company's own figures before you advise.

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General information for UK small firms, not legal, tax or financial advice.