Section 455 Tax

Key facts

Section 455 tax is charged at 33.75% of the outstanding loan balance.
It is due nine months and one day after the end of the accounting period.
The tax is refundable when the loan is repaid or written off.
The refund is paid nine months and one day after the end of the period in which repayment occurs.
A 30-day anti-avoidance rule catches “bed & breakfasting” arrangements.

When Section 455 Tax Applies to Directors' Loans

Section 455 of the Corporation Tax Act 2010 imposes a tax charge on close companies that make loans to their participators (or associates of participators) that are not repaid by the normal CT payment date.^[2]

In practice, this most commonly affects owner-managed companies where a director-shareholder has an overdrawn director’s loan account. The tax acts as a temporary deposit with HMRC — encouraging timely repayment of the loan.

Key terms:

Close company — broadly, a company controlled by five or fewer participators (most small limited companies)
Participator — a shareholder, loan creditor, or anyone with a right to the company’s income or assets
Associate — a relative (spouse, parent, child, sibling) or business partner of a participator

When Is Section 455 Tax Due?

The tax is due nine months and one day after the end of the accounting period in which the loan was outstanding — the same date as the normal CT payment deadline.^[1]

Accounting Period End	S455 Tax Due Date	Loan Must Be Repaid By
31 March 2026	1 January 2027	1 January 2027 to avoid the charge
31 December 2025	1 October 2026	1 October 2026 to avoid the charge
30 June 2026	1 April 2027	1 April 2027 to avoid the charge

Tip: If the director repays the loan in full before the nine-months-and-one-day deadline, no Section 455 tax is due at all. This is the simplest way to avoid the charge.

How the Tax Is Calculated

Section 455 tax is calculated at 33.75% of the outstanding loan balance at the end of the accounting period (this rate matches the higher rate of dividend tax, reflecting that the loan is economically similar to an untaxed dividend).^[1]

Example: A director has an overdrawn DLA of £30,000 at the company’s year-end (31 March 2026). The loan is still outstanding on 1 January 2027. The company must pay S455 tax of £30,000 × 33.75% = £10,125 to HMRC by 1 January 2027.^[1]

Reclaiming Section 455 Tax

Section 455 tax is refundable once the loan is repaid (in full or in part) or written off. However, the refund process is not instant:^[2]

The refund is paid nine months and one day after the end of the accounting period in which the loan was repaid
Partial repayments trigger partial refunds, calculated proportionally
The company must actively claim the refund — typically by submitting the CT600 for the period in which repayment occurred, or by writing to HMRC

Event	Date
AP ends (loan outstanding: £30,000)	31 March 2026
S455 tax paid (£10,125)	1 January 2027
Director repays loan in full	15 November 2026 (within AP ending 31 March 2027)
S455 refund received	1 January 2028 (9 months + 1 day after 31 March 2027)

The 30-Day Anti-Avoidance Rule

To prevent directors from temporarily repaying a loan to avoid Section 455 tax and then re-borrowing, HMRC applies a 30-day rule:^[2]

If a repayment of £5,000 or more is made, and a new loan of £5,000 or more is taken out within 30 days (before or after the repayment), the repayment is treated as if it never happened
The company remains liable for Section 455 tax on the original amount
This is known as the “bed and breakfasting” anti-avoidance rule

There is also an intentions rule: even outside the 30-day window, if arrangements exist at the time of repayment to take out a further loan, the repayment can be disregarded.

Important: The 30-day rule applies to loans from the same company. If the director repays a loan from Company A and borrows from Company B (both close companies in which they are a participator), separate rules may still apply.^[2]

Reporting on the CT600A

Loans to participators are reported on the CT600A supplementary page, which must be submitted with the company’s CT600 return. The CT600A requires:^[3]

Details of each loan or advance to a participator
The amount outstanding at the end of the accounting period
Details of any repayments made after the period end but before the filing date
Calculation of the Section 455 tax due

Frequently Asked Questions

What is Section 455 tax?

Section 455 CTA 2010 charges a close company 33.75% tax on loans made to participators (typically director-shareholders) that remain outstanding nine months and one day after the accounting period end.

Is Section 455 tax refundable?

Yes. The tax is refunded when the director repays (or the company writes off) the loan. However, the refund is not paid until nine months and one day after the end of the accounting period in which repayment occurs.

How do I avoid Section 455 tax?

The simplest way is to repay the director’s loan in full before the nine-months-and-one-day deadline after your accounting period end. If repaid by that date, no Section 455 tax is due at all.

What is the 30-day bed and breakfasting rule for directors’ loans?

If a repayment of £5,000 or more is made and a new loan of £5,000 or more is taken within 30 days, the repayment is treated as if it never happened and the company remains liable for Section 455 tax.

Sources

Tax on directors' loans — GOV.UK
Company Taxation Manual: loans to participators — HMRC
Directors' loans — GOV.UK