Three questions that need separate calculations
- Company charge: is a qualifying loan to a participator still outstanding after the relevant repayment period?
- Personal benefit: does the employment-related loan create a taxable interest benefit?
- Repayment or release: what tax and claim consequences follow from the actual later transaction?
A loan is not automatically a dividend or salary. The treatment depends on the transaction and the relevant rules; a calculator cannot turn company cash into tax-free personal income.
Section 455: the date and outstanding balance matter
For loans within the close-company participator rules, a charge can arise where the loan is not repaid within nine months of the accounting-period end. HMRC lists a 35.75% rate for loans made on or after 6 April 2026; earlier loan dates may carry different rates.
For an illustrative £10,000 balance subject to the 35.75% rate, the charge is £10,000 × 35.75% = £3,575. This is a company charge, separate from ordinary Corporation Tax on profits and from any personal beneficial-loan tax. A real account with advances and repayments at different dates needs transaction-level review.
The beneficial-loan test is different
The £10,000 small-loan exemption concerns employment-related beneficial-loan rules, not a general exemption from Section 455. Check the aggregate maximum balance during the tax year and the applicable exemption conditions.
Where a taxable benefit arises, the calculation depends on the official interest rate, the balance method, the period and interest actually paid. A maximum balance is not automatically the average balance. An interest-rate illustration does not complete a P11D or employer Class 1A assessment.
Repayment is not an automatic refund instruction
A company may be able to claim relief after an eligible repayment, release or write-off. The timing and claim conditions matter, and a tax relief claim does not cancel every other liability. Interest on a late Section 455 payment is not simply refunded with the tax.
Rules can restrict relief for repayment followed by reborrowing or arrangements for further advances. Writing off a loan can create personal Income Tax and potentially National Insurance consequences. Obtain advice using the actual account rather than following a generic repayment strategy.
Records to bring to the calculation
- Accounting-period end and each advance/repayment date.
- Balances outstanding at the relevant dates, plus maximum and average balances where needed.
- Interest actually charged and paid, and the rate applying during each period.
- The director employment/shareholding position and any other connected loans.
- Evidence for a later repayment and any associated new borrowing.
Official guidance
Frequently Asked Questions
Clear answers based on official HMRC rules and statutory guidance.