s455 tax rate

S455 Tax Rates & Directors’ Loan Account

In this blog, we’ll be discussing: what is S455 tax, what are the S455 tax rates, what is the director’s loan account, and when does a company need to offer money to its directors. Before delving deep into other details, let’s kick off with what exactly Section 455 tax is!


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What is S455 Tax?

Directors can lend and borrow money from the companies that are operated personally or by family. When a director of a company borrows from the company, the borrowed money is recorded in a director’s loan account. The director may either clear the loan by paying back money taken from the company or by crediting dividends or salary to the account.

In case, if the director is unable to clear his loan account and can’t pay it back within nine months at the end of the year, then the company is liable to pay an amount of corporation tax known as S455 tax. Let’s find out the S455 tax rates!


What are the S455 Tax Rates?

What are the S455 Tax Rates

Currently, S455 tax rates levied on the loans provided to participators (e.g. shareholders or loan creditors) are linked to the dividend upper rate, which is 32.5% onward from 6 April 2016. Earlier it was 25%. It is done to prevent individuals from getting an unfair tax advantage by taking loans from their companies instead of dividends or remunerations.

This rate will increase to 33.75% for loans made after 6 April 2022, in line with the dividend upper rate.


Directors’ Loan Account

It is an account of the financial records of the company that keeps track of all the transactions between a director and the business. This account can either be debit or credit. If it’s debit, the director needs to pay money to the company. On the other hand, if it’s credit, the company needs to pay money to the director. In the former case, where the director owes money to its company, it is called overdrawn director loan account.


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When Does a Company need to Offer money to its Directors?

A company would permit a director to get a loan from it if the following conditions apply:

  • Businesses need to comply with the 2006 Companies Act and Corporation’s articles of association
  • The business should be financially stable
  • The money required to fulfil the company’s spending cannot be over £50,000
  • If the business turnover is less than £10,000, permission from a shareholder is usually not required
  • If the business turnover is over £10,000, shareholder consent is required through an ordinary resolution


How Accotax can Help?

If you are experiencing difficulty with regard to corporation tax, dividend tax increase, S455 tax rates or looking for advice to reclaim S455 tax or other tax-related matters, contact our qualified accountants and tax experts to sort out all your concerns. We offer expert support on the preparation and the submission of your business accounts and self-assessment tax return to HMRC.


Our chartered accountants at Accotax offer free initial consultations, advice, and support over the phone at 0800 644 1258 or via video.


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Disclaimer: This article intends to provide general information on S455.

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