Overdrawn director loan account
A director loan account records money moving between a director and the company outside salary and dividends. It becomes overdrawn when you have taken out more than you put in or were owed, which means you personally owe that money to the company. If the company fails, a liquidator can pursue you personally to repay it, so it is worth understanding your position before closure. HMRC CTM61505 (s455); Insolvency Service
- What it is
- A record of money owed between you and the company
- Overdrawn means
- You owe the company money personally
- s455 tax
- 35.75% for loans made on or after 6 April 2026 (33.75% for 6 April 2022 to 5 April 2026) if not repaid within nine months and one day of year end
- On insolvency
- The liquidator collects it from you personally
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Solvent: mainly a tax issue
While the company is solvent, an overdrawn balance is mainly a tax issue: if it is not repaid within nine months and one day of the company year end, the company pays a temporary tax charge under section 455 on the balance, refundable once the loan is repaid.
Why it matters most at closure
If the company becomes insolvent, the position is sharper. The overdrawn balance is an asset the liquidator must collect, and liquidators can and routinely do pursue directors personally to repay it. You cannot simply write it off, and understanding your position early matters because it directly affects your personal exposure if the company fails.
An overdrawn balance is one of the main reasons a director ends up personally out of pocket when a company is liquidated. Our director loan account tax calculator shows the s455 charge, and a practitioner can explain how the balance is treated on insolvency before you act.
Where to go from here
- If you decide to speak to a Licensed Insolvency Practitioner, choose your own: our practitioner directory lists every practitioner on the official Insolvency Service register, and how to choose an insolvency practitioner explains what to ask. Always confirm their entry on the official register before you instruct anyone.
Common questions
Do I have to repay an overdrawn director loan account?
Generally yes. It is money you owe the company. If the company is liquidated, the liquidator will seek repayment, and you can't simply write it off. Take advice on your options.
What is the s455 tax charge?
If an overdrawn balance isn't cleared within nine months and one day of the year end, the company pays a temporary charge on the balance, refundable once the loan is repaid. The rate is 35.75% for loans made on or after 6 April 2026, and 33.75% for loans made between 6 April 2022 and 5 April 2026 (HMRC Corporation Tax Manual CTM61505).