Example

Worked example

Period end: 31 March 2026; Outstanding: £25,000; Repaid within 9 months: £10,000; Benefit tax year: 2026-27; Benefit opening balance: £25,000; Benefit closing balance: £15,000; Benefit maximum balance: £25,000; Benefit whole months: 12; Benefit interest paid: £0; Marginal income tax rate: £20. Enter your own details to replace this example.

On a £25,000 director's loan outstanding at 31 March 2026, the company owes £5,062.50 of section 455 tax, due 1 January 2027: £8,437.50 (33.75%) less £3,375.00 relief for the £10,000 repaid by 31 December 2026. HMRC refunds the rest 9 months and 1 day after the end of the accounting period in which the £15,000 is repaid.

Loan owed at 31 March 2026

£25,000.00

Rate for a loan made on 31 March 2026 (assumed: the period end)

33.75%

Section 455 tax on the loan

£8,437.50

Relief for £10,000.00 repaid, released or written off by 31 December 2026

£3,375.00

Net section 455 tax payable

£5,062.50

Due date (with the Corporation Tax)

1 January 2027

Still owed after those repayments

£15,000.00

If the rest is repaid in the next accounting period (to 31 March 2027), relief is due from

1 January 2028

Beneficial-loan taxable benefit (average method)

£750.00

Director’s estimated Income Tax on the benefit

£150.00

Company Class 1A National Insurance

£112.50

• We assumed the loan was made on the period end date. The rate is set by the date each loan was made: 33.75% for loans made from 6 April 2022 to 5 April 2026, and 35.75% on or after 6 April 2026 (32.5% from 6 April 2016, 25% before). For loans made on dates either side of 6 April 2026, work out each one separately.
• Section 455 tax applies only to a close company (broadly, one controlled by 5 or fewer shareholders, or by its directors) lending to a participator, such as a shareholder-director, or to their associate.
• It is not Corporation Tax on profits. It is a temporary charge, paid with the Corporation Tax and reported on the CT600A supplementary page, and HMRC refunds it once the loan is repaid, released or written off.
• A repayment of £5,000 or more is matched to new lending instead of the old loan if £5,000 or more is lent again to the same person or an associate within 30 days before or after it, or if they owed £15,000 or more and at least £5,000 of new lending was already arranged (CTA 2010 s.464ZA). The old loan then stays outstanding.
• Releasing or writing off the loan earns the same relief, but the director is then taxed on the amount: Income Tax through Self Assessment, and Class 1 National Insurance through the company's payroll.
• If a director owes more than £10,000 at any time in 2025/26 or 2026/27 and pays less than HMRC's 3.75% official rate of interest, the loan is also a benefit in kind for the director.
• For 2026/27, 3.75% is HMRC's actual official rate from 6 April 2026. HMRC publishes the tax year's average official rate after the tax year ends.
• The beneficial-loan estimate uses the normal averaging method, the 3.75% official rate and 15% Class 1A rate. Either the director or HMRC can require the alternative precise method, which may produce a different figure.
• Claim relief for a later repayment within 4 years of the end of the financial year (1 April to 31 March) in which it is repaid. Interest charged on late-paid s.455 tax is not refunded.
• The tax is worked out on whole pounds, as on the CT600A. Dates assume the company doesn't pay Corporation Tax by quarterly instalments and that its next accounting period is 12 months long.

Sources: Corporation Tax Act 2010, section 455 (charge to tax on loans to participators) · Corporation Tax Act 2010, section 458 (relief when a loan is repaid, released or written off) · HMRC Company Taxation Manual CTM61505: s.455 rates by date the loan was made · GOV.UK: Director's loans — if you owe your company money · Corporation Tax Act 2010, section 464ZA (30-day and arrangements rules) · GOV.UK: Beneficial loan arrangements — HMRC official rates · GOV.UK: Beneficial loan arrangements — normal averaging method · GOV.UK: Class 1A National Insurance rates on expenses and benefits