Director's Loan Account (DLA)

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Director's loan account (DLA) mechanics for property company (SPV/LTD) landlords. Credit DLA (company owes director): director's injected capital; repay tax-free; director can charge interest (CT-deductible; income tax for director). Overdrawn DLA (director owes company): s.455 CTA 2010 — 33.75% tax charge on overdrawn balance at year end; payable if not cleared within 9 months and 1 day of accounting year end; BIK benefit in kind if overdrawn loan exceeds £10,000 at any point in tax year (ITEPA 2003 ss.173-183; official rate 3.25% 2025/26; P11D; Class 1A NICs 13.8%); 30-day bed and breakfast anti-avoidance (CTA 2010 s.464A); s.458 CTA 2010 repayment relief when DLA is cleared.

10 min readUpdated 7 June 2026Last reviewed: 17 May 2026DLAdirector-loan-accountproperty-companysection-455

Credit DLA — mechanics, repayment and interest

A credit DLA arises when the director has lent money to the company (injected capital; paid company expenses from personal funds; declared but undrawn dividends). Repayment of a credit DLA is tax-free — it is the return of the director's own capital. The director can charge interest at a commercial rate: deductible from the company's corporation tax; income tax for the director (savings income; personal savings allowance applies). Companies Act 2006 s.413 requires disclosure of director loans above £15,000 in the company's annual accounts.

Overdrawn DLA and the section 455 tax charge

An overdrawn DLA arises when the director draws more from the company than entitled to in salary and declared dividends. At year end, if overdrawn and not cleared: s.455 CTA 2010 charge at 33.75% of the overdrawn balance — payable within 9 months and 1 day of the accounting year end. The 9-month window allows directors to clear the DLA before the CT600 due date (repay cash to company; or formally declare a dividend equal to the balance if sufficient distributable reserves exist).

Benefit in kind if overdrawn DLA exceeds £10,000

If the overdrawn DLA exceeds £10,000 at any point during the tax year, a benefit in kind arises (ITEPA 2003 ss.173-183). Calculated at HMRC's official rate (3.25% 2025/26) on the average overdrawn balance. Reported on P11D (due 6 July); director pays income tax at marginal rate; company pays Class 1A NICs at 13.8%. Eliminated if the director pays interest on the overdrawn DLA at or above the official rate.

30-day anti-avoidance rule and section 458 repayment relief

30-day bed and breakfast rule (s.464A CTA 2010): repaying £5,000+ within 30 days of the s.455 due date and re-drawing the same within 30 days means the repayment is ignored — the s.455 charge still applies. Section 458 CTA 2010 relief: when the director genuinely repays the overdrawn DLA, the s.455 tax is reclaimed from HMRC — 9 months and 1 day after the end of the accounting period in which the repayment occurs. Writing off the DLA is NOT recommended — treated as employment income for the director (income tax + PAYE/NIC; not dividend treatment).

Frequently asked questions

What is a director's loan account in a property company?+

A DLA tracks money flows between the director and the limited company other than salary and declared dividends. Credit DLA: company owes the director (director's injected capital — repayment is tax-free; director can charge interest). Overdrawn DLA: director owes the company (drawn more than entitled to in salary and dividends — triggers s.455 tax charge and potentially BIK).

What is the section 455 tax charge?+

Section 455 CTA 2010 imposes a corporation tax charge of 33.75% on the overdrawn DLA balance outstanding at the company's accounting year end, payable within 9 months and 1 day. The charge is not permanent — it is reclaimed via s.458 CTA 2010 when the director subsequently repays the DLA (with a 9-month delay). If the DLA is cleared before the 9-month deadline, no s.455 charge arises.

When does a benefit in kind arise on an overdrawn director's loan?+

A BIK arises under ITEPA 2003 ss.173-183 when the overdrawn DLA exceeds £10,000 at any point during the tax year. Charged at HMRC's official rate (3.25% 2025/26) on the average overdrawn balance. Reported on P11D; director pays income tax at marginal rate; company pays Class 1A NICs at 13.8%. Eliminated if the director pays interest on the loan at or above the official rate.

What is the 30-day bed and breakfast anti-avoidance rule?+

CTA 2010 s.464A prevents directors from repaying the overdrawn DLA just before the 9-month deadline and immediately re-borrowing the same amount. If the director repays £5,000 or more within 30 days of the s.455 charge becoming due and then re-draws the same amount within 30 days, the repayment is ignored for s.455 purposes and the charge still applies.

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