UK Director Loan: What It Is, How It Works, and What You Must Know

When a UK director loan, a financial transaction where a company director borrows or lends money to their own limited company. Also known as a director’s overdraft, it’s a common tool for managing cash flow—but one that HMRC watches closely. This isn’t just a personal loan between you and your business. It’s a legal record that affects your tax bill, your company’s accounts, and even your ability to stay compliant with Companies House.

Every time you take money out of your company that isn’t a salary, dividend, or expense reimbursement, it becomes part of your director loan account, a running ledger that tracks all money you owe to or are owed by your company. If you owe your company more than £10,000 at any point in the tax year, you’re triggering a taxable benefit. If your company owes you money and it’s not repaid within nine months of your year-end, the company must pay a 32.5% tax charge under Section 455 of the Corporation Tax Act. This isn’t a loophole—it’s a rule. And many small business owners get caught off guard because they think, "It’s my money," but legally, it’s not until it’s properly recorded and repaid.

Related concepts like Companies House, the UK government agency that maintains official records of all registered companies and HMRC director loans, the tax authority’s system for monitoring and taxing director-company transactions are deeply connected. Your director loan must appear in your company’s statutory accounts. If it doesn’t, or if the numbers don’t match what you’ve reported to HMRC, you risk penalties, audits, or even being classified as a disguised dividend. There’s no room for guesswork.

You’ll find real examples in the posts below—how one London-based consultant avoided a £12,000 tax bill by repaying their loan on time, how a Manchester startup used a director loan to fund payroll during a slow quarter without breaking rules, and why a Birmingham designer got hit with a surprise tax charge because they didn’t track their account properly. These aren’t hypotheticals. These are situations real UK directors face every year.

This collection doesn’t just explain the rules. It shows you how to manage your director loan account like a pro—without an accountant. You’ll see how to record transactions correctly, when to repay, how to avoid the Section 455 tax trap, and what paperwork HMRC actually needs. No fluff. No theory. Just what works for small businesses in the UK right now.