Last updated: 19 October 2026
Does your company have to pay NIC on a director’s loan over £10,000?
Yes, in most cases. If a company lends a director more than £10,000 at any point in the tax year, interest-free or below HMRC’s official rate (3.75% for 2026/27), the director has a taxable benefit in kind. The company must report it on form P11D and pay Class 1A National Insurance at 15% on the cash equivalent. The NIC is due by 22 July after the tax year. A separate s455 corporation tax charge of 35.75% (33.75% for loans made before 6 April 2026) applies if the loan is still unpaid 9 months after the company’s year end.
The two charges compared
| Charge | When it applies | Rate | Recoverable? |
| Benefit in kind (P11D) | Loan over £10,000 at any time in tax year, interest below official rate | Director’s income tax rate on cash equivalent; company pays 15% Class 1A NIC | No |
| s455 corporation tax | Loan outstanding 9 months after year end | 35.75% of the loan (33.75% if made before 6 April 2026) | Yes, once repaid |
| Class 1 NIC | Loan written off for a director-employee | Primary and secondary Class 1 | No |
Working out the benefit
The cash equivalent is interest at the official rate, less any interest the director pays. You can use the average method (opening and closing balance, averaged) or the precise daily method.
Example
Laura borrows £30,000 from her company on 6 April 2026 and repays it on 5 April 2027, paying no interest. The cash equivalent is £30,000 × 3.75% = £1,125. Laura pays income tax at 40% on this, £450, through Self Assessment or her tax code. The company pays Class 1A NIC of £1,125 × 15% = £168.75 by 22 July 2027. If Laura pays interest of at least 3.75%, there’s no benefit and no Class 1A.
Writing off the loan
If the company writes off a loan to a director who is also an employee, HMRC’s view is that Class 1 NIC is due through payroll on the amount written off, although the income tax is charged as a distribution on the director. This is often more expensive than people expect.
Avoiding the charges
- Keep the balance under £10,000 throughout the tax year
- Charge interest at the official rate or more
- Repay within 9 months of the year end to avoid s455
- Declare a dividend or bonus to clear the balance, accepting the tax on that
Bed and breakfasting rules
Repaying a loan just before the deadline and borrowing it again within 30 days doesn’t avoid s455. The rules match repayments to new borrowing.
Common mistakes
- Not reporting the benefit because the loan was repaid before year end
- Forgetting a loan peaked above £10,000 for a short period
- Paying Class 1A late, which triggers interest and penalties
- Overlooking Class 1 NIC on a write-off
Records to keep
Keep the director’s loan account ledger, board minutes approving the loan, and evidence of any interest paid.
Frequently asked questions
Does a loan to a shareholder who isn’t an employee count?
No benefit in kind, but s455 still applies to close companies.
Is interest received taxable on the company?
Yes.
Does the £10,000 apply per loan?
It applies to the total of all loans to that director.
Can the company deduct the Class 1A?
Yes, it’s an allowable expense.
Related: reclaiming s455 tax, writing off a director’s loan and the tax charge on directors’ loans.
Talk to Accotax
Want this handled for you? Our team at Accotax can help with director’s loan benefits and NIC. See our small business accountants service, or contact us for a free, no-obligation quote.
This page is general guidance based on HMRC rules for the 2026/27 tax year, checked against gov.uk on 14 October 2026. It is not personal advice, so speak to an accountant about your own situation.
