S455 Tax: What UK Directors Need to Know About Loan Repayments and Corporation Tax

When a director borrows money from their own company, S455 tax, a corporation tax charge applied by HMRC on loans made to directors. Also known as Section 455 tax, it’s not a personal tax—it’s a temporary corporation tax charge designed to stop directors from using company funds like their own pocket money. If you take a loan from your limited company and don’t repay it within nine months and one day after your accounting period ends, HMRC will slap a 32.5% tax charge on the outstanding amount. That’s not a fine. It’s a tax on the company, not you. But here’s the catch: if you never repay the loan, that tax stays on the books. And if you do repay it, you get the tax back—minus a small administrative fee.

S455 tax doesn’t apply to every loan. It targets director loans, money borrowed by a director from their own limited company that aren’t part of a formal salary or dividend. It also covers loans to family members or associates if they’re connected to the director. So if your spouse takes £10,000 from the company and you control the business, HMRC treats it as your loan. The same goes for shareholder loans, when a shareholder who isn’t a director borrows from the company and holds over 5% of shares. These rules exist because HMRC sees these loans as disguised dividends—way to avoid income tax and National Insurance.

Many directors think they can just write off the loan as a bonus or expense. They can’t. HMRC tracks every loan through company accounts and CT600 filings. If you miss the nine-month repayment window, the tax hits immediately. And if you keep rolling the loan over year after year? You’ll pay S455 tax every time. There’s no way around it. But here’s the good news: if you repay the loan on time, you get the full tax amount back. No interest, no penalty. Just a refund. That’s why smart directors set up repayment reminders or tie the loan to a specific date—like the end of the financial year.

Some companies use director loans to manage cash flow during slow months. That’s fine—as long as you repay it. Others use them to pay for personal expenses like a new car or a holiday. That’s risky. HMRC audits these cases closely. If you’ve got a £50,000 loan sitting on your books for three years, expect questions. The solution isn’t to hide it. It’s to plan it. Set a clear repayment schedule. Document it in writing. And if you’re unsure, check your company’s accounts with an accountant before year-end.

What you’ll find below are real, practical guides from UK business owners who’ve dealt with S455 tax head-on. You’ll see how they structured repayments, avoided penalties, and turned a tax headache into a simple accounting task. No fluff. No jargon. Just what works.