Section 455 is the charge a close company pays when it lends money to a participator, in practice a director-shareholder, and the loan is still outstanding nine months and one day after the end of the accounting period. The s455 tax rate is 33.75 percent of the amount still owed, per gov.uk, paid with the corporation tax on the CT600A, and it is a temporary charge: it is reclaimable once the loan is repaid, released or written off. Beside it sits a second charge on the director personally where the loan is over £10,000 and interest is paid below HMRC's official rate. This page sets out the rate and the date, how the reclaim works and how slow it is, the directors loan interest rate that avoids the benefit, and the repayment patterns HMRC does not accept, with the free calculator on this site working the figures.
The rate and the date
33.75 percent of the loan outstanding nine months and one day after the accounting period ends, per gov.uk, for loans made from 6 April 2022; 32.5 percent for loans made before. The charge is on what is still owed at that date, so a loan drawn in month one and repaid in month eight of the following year carries no s455 at all, and a loan drawn on the last day of the period and still owed nine months later carries the full charge. The company pays it with its corporation tax and reports it on the CT600A supplementary pages, and the loan itself is reported on the return whether or not the charge arises.
The s455 reclaim, and why it is slow
Once the loan is repaid, released or written off, the company can reclaim s455 tax, but not the interest charged on it, per gov.uk, and the reclaim is not due until nine months and one day after the end of the accounting period in which the repayment happens. A loan charged in year one and repaid in year two produces a reclaim in year three. The claim is made on the CT600A or by writing to HMRC with the amounts and dates, and the money comes back as a repayment of corporation tax. The cost to the company is therefore not the 33.75 percent but the use of it for a year or more.
The directors loan interest rate that avoids the benefit charge
Where the loan was more than £10,000 at any point in the tax year, a director who pays interest below HMRC's official rate has a beneficial loan, taxed on them as a benefit in kind and charged Class 1A National Insurance on the company at 15 percent, per gov.uk. The average official rate is 3.75 percent for 2025 to 2026, per gov.uk's published table. A director who pays the company interest at or above the official rate has no benefit, and the interest is income of the company; one who pays nothing is taxed on the loan times the official rate for the months it was outstanding. The calculator works both lines.
What repaying and redrawing does not do
Repaying the loan just before the nine month date and drawing it again after does not clear the charge. Per gov.uk, a repayment of more than £5,000 followed within thirty days by a new loan of £5,000 or more is matched, and the charge stays on the original loan; so is a repayment of more than £15,000 where a new loan was arranged at the time. What does clear it is a real repayment: cash, a dividend declared out of retained profit and credited to the loan account, or salary credited the same way, each with its own tax on the director. Writing the loan off releases it, with the amount treated as a dividend on the director and, usually, National Insurance as well.
Questions people ask about s455 tax rate
Is s455 a corporation tax?
It is charged as if it were corporation tax and paid with it, per gov.uk, but it is a separate charge under section 455 and it is refundable when the loan is repaid, which corporation tax on profit never is.
Does s455 apply to a loan under £10,000?
Yes. The £10,000 figure is the threshold for the beneficial loan benefit on the director, not for s455. A £4,000 loan still owed nine months after the year end carries s455 at 33.75 percent on the £4,000 and no benefit charge.
Can the company just declare a dividend to clear the loan?
If it has the retained profit, yes, and the dividend is credited against the loan rather than paid in cash. The director pays dividend tax on it above the £500 allowance at their band, and the voucher and minute are still required. Without the retained profit the dividend is unlawful and the loan remains.