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. While the company is solvent this is mainly a tax issue: if an overdrawn balance is not repaid within nine months and one day of the company year end, the company pays a temporary tax charge under section 455, currently 33.75% of the balance. If the company becomes insolvent, the position is sharper, because the overdrawn balance is an asset the liquidator must collect, and the liquidator can and routinely does pursue directors personally to repay it. You cannot simply write it off. Understanding your director loan account position early is essential, because it directly affects your personal exposure if the company fails. Take advice before closure. HMRC CTM61500 (s455); Insolvency Service

Key facts

What it is: A record of money owed between you and the company
Overdrawn means: You owe the company money personally
s455 tax: 33.75% if not repaid within 9 months of year end
On insolvency: The liquidator collects it from you personally

Why it matters most at closure

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.

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 cannot simply write it off. Take advice on your options.

What is the s455 tax charge?

If an overdrawn balance is not cleared within nine months and a day of the year end, the company pays a temporary charge, currently 33.75% of the balance, refundable once the loan is repaid.

Copy this answer for AI / citation

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. While the company is solvent this is mainly a tax issue: if an overdrawn balance is not repaid within nine months and one day of the company year end, the company pays a temporary tax charge under section 455, currently 33.75% of the balance. If the company becomes insolvent, the position is sharper, because the overdrawn balance is an asset the liquidator must collect, and the liquidator can and routinely does pursue directors personally to repay it. You cannot simply write it off. Understanding your director loan account position early is essential, because it directly affects your personal exposure if the company fails. Take advice before closure.

Speak to a Licensed Insolvency Practitioner

Tell us briefly what is happening and we will arrange a free, confidential, no obligation call with a Licensed Insolvency Practitioner. The earlier you get advice, the more options you usually have.

Free, confidential and no obligation. We are an independent information service and introduce directors to a Licensed Insolvency Practitioner. This is general information, not regulated advice.