Director's Loans and the CT600A

What is a director's loan account, and when do you need the CT600A? This guide explains how director's loans work for UK corporation tax, what TinyTax handles, and what requires separate filing.

What Is a Director's Loan Account?

A director's loan account (DLA) tracks money moving between the company and its directors. Every time a director puts money into the company or takes money out (other than salary, dividends, or expense reimbursements), the transaction goes through the DLA.

The DLA can be in one of two states:

Loans FROM the Director TO the Company

When a director lends money to the company, the DLA has a credit balance. This is common in small companies where directors fund the business from personal savings.

How it works:

• The company owes the director money
• It appears as a creditor on the balance sheet (under "Amounts owed to directors")
• No Section 455 tax applies
• No CT600A is needed

Entering This in TinyTax

In the Balance Sheet section, enter the amount owed to the director as a creditor:

This reduces the company's net assets and is a straightforward balance sheet entry. There are no corporation tax implications for the company.

Interest on Director-to-Company Loans

If the director does not charge interest, there are no tax implications for the company.

If the director does charge interest, the company can deduct the interest as an expense. The director must declare the interest as personal income on their Self Assessment tax return.

Loans FROM the Company TO the Director

When a director takes money out of the company beyond their salary and dividends, the DLA becomes overdrawn. This is where tax complications arise.

How it works:

• The director owes the company money
• It appears as a debtor on the balance sheet (under "Amounts owed by directors")
• Section 455 tax applies at 25% of the outstanding balance
• The company must file a CT600A supplementary page

What Is Section 455 Tax?

Section 455 of the Corporation Tax Act 2010 charges tax on loans made by close companies to their participators (typically directors and shareholders). The tax is:

• 25% of the outstanding loan balance at the end of the accounting period
• Due 9 months and 1 day after the end of the accounting period (the same date as corporation tax)
• Repayable when the director repays the loan (see "Repayment and S455 Relief" below)

``` Director's overdrawn DLA at period end: £20,000 S455 tax due (25%): £5,000 ```

What Is the CT600A?

The CT600A is a supplementary page to the CT600. It reports:

• Loans and advances made to participators (directors/shareholders)
• The amount of S455 tax due
• Details of any loans repaid or written off

What TinyTax Supports

TinyTax handles director's loans to the company (credit balances) as a standard creditor on the balance sheet. This covers the most common small company scenario.

If You Have an Overdrawn DLA

If your director's loan account is overdrawn at the period end, you have several options:

1. Repay the loan before the period end - If the director repays the full amount before the accounting period ends, no S455 tax is due and no CT600A is needed.

1. Declare a dividend - The company can declare a dividend to clear the overdrawn balance (subject to having sufficient distributable reserves). This converts the loan into a dividend, which is taxed differently.

1. File the CT600A separately - Use HMRC's online service or specialist software to file the CT600A alongside your CT600.

1. Use an accountant - For complex DLA situations, professional advice ensures correct reporting.

Repayment and S455 Relief

S455 tax is not a permanent cost. When the director repays the loan, the company can reclaim the S455 tax:

How Relief Works

``` Year 1 (period end 31/03/2025): Overdrawn DLA: £20,000 S455 tax paid: £5,000

Year 2 (director repays £20,000 on 15/08/2025): S455 relief claimed: £5,000 (refund from HMRC) ```

Bed and Breakfasting Rules

HMRC has anti-avoidance rules to prevent directors from temporarily repaying loans around the period end and then re-borrowing.

The "30-day rule": If a director repays a loan of £5,000 or more and then takes out a new loan of £5,000 or more within 30 days, HMRC treats the repayment as ineffective for S455 purposes.

The "arrangements" rule: If at the time of repayment there is an arrangement (formal or informal) for the director to re-borrow, the repayment may not qualify for relief regardless of the 30-day window.

Writing Off a Director's Loan

If the company writes off an overdrawn DLA (i.e., the director does not have to repay it):

• The written-off amount is treated as a distribution to the director
• The director pays income tax on the amount (as if it were a dividend)
• The company owes Class 1 National Insurance on the written-off amount
• S455 tax is still due (but can be reclaimed once the write-off is processed)

Common Scenarios

"I put personal money into the company"

This is a director-to-company loan. Enter it as a creditor on the balance sheet. No S455 or CT600A is needed.

"I took money out for personal expenses"

If these withdrawals are not salary or dividends, your DLA is overdrawn. You may need a CT600A and should consider repaying before the period end.

"I used the company card for personal purchases"

Personal spending on the company card creates an overdrawn DLA for the amount not reimbursed. The same S455 rules apply.

"My DLA was overdrawn but I repaid it before the year end"

If the balance is fully repaid by the last day of the accounting period, no S455 tax is due and no CT600A is needed.

"My DLA shows both money in and money out"

The DLA is a running balance. Only the net position at the period end matters for S455. If the net balance is a credit (company owes the director), no S455 applies.

Record Keeping

Maintain clear records of your director's loan account:

• Date and amount of every transaction
• Purpose of each withdrawal or deposit
• Running balance updated after each transaction
• Period-end balance clearly documented

Summary

Still Have Questions?

If you're unsure about your director's loan position, contact us and we can advise whether TinyTax is suitable for your situation.

Last updated: February 2026