S455 tax is a corporation tax charge that a close company pays when it lends money to a shareholder or director and the loan is still outstanding nine months and one day after the end of the accounting period. The rate is 35.75 percent for loans made on or after 6 April 2026, and 33.75 percent for loans made between 6 April 2022 and 5 April 2026. It is a temporary charge rather than a permanent one: the company can reclaim the tax once the loan is repaid, released, or written off, though the timing rules mean the cash can be tied up with HMRC for well over a year.
When the Charge Applies
Two things have to be true. The company has to be a close company, and the borrower has to be a participator or someone connected to one.
A close company, defined by Section 439 of the Corporation Tax Act 2010, is one controlled by five or fewer participators, or controlled by participators who are also directors.1Legislation.gov.uk. Corporation Tax Act 2010 – Section 439 Most owner-managed UK limited companies meet at least one of those tests. Non-UK-resident companies are excluded.
A participator is anyone with a share or interest in the company’s capital or income, including shareholders, people entitled to voting rights or distributions, and loan creditors of the company.2Legislation.gov.uk. Corporation Tax Act 2010 – Section 454 The typical case is a director who owns shares.
The most common trigger is an overdrawn director’s loan account, where the director has drawn more from the company than they are owed in salary or dividends. But the charge also catches loans to an associate of a participator (a spouse, child, or business partner), loans to a trust where a participator is a trustee or potential beneficiary, and loans to a partnership or LLP that includes a participator as a member.3Legislation.gov.uk. Corporation Tax Act 2010 – Section 455 Lending to a spouse gets the same treatment as lending to the director directly, which closes off the obvious workaround.
One point worth clearing up: the charge is calculated on loans made during the accounting period, not on the total balance outstanding at the end of it. If the company lends £10,000 in year one and a further £5,000 in year two, only the new £5,000 is charged in year two, because s455 was already paid on the earlier advance.4HM Revenue & Customs. Company Taxation Manual – CTM61505
The Rate
Section 455(2) ties the rate to the dividend upper rate for the tax year in which the loan was made, so it moves whenever dividend tax rates move.3Legislation.gov.uk. Corporation Tax Act 2010 – Section 455 The current and recent rates are:
- 35.75 percent for loans made on or after 6 April 2026
- 33.75 percent for loans made between 6 April 2022 and 5 April 2026
- 32.5 percent for loans made between 6 April 2016 and 5 April 2022
The rate that applies is fixed by the date the loan was made, not the date the tax falls due. A loan advanced on 1 April 2026 carries 33.75 percent; one made on 10 April 2026 carries 35.75 percent, even if both sit on the same tax return.4HM Revenue & Customs. Company Taxation Manual – CTM61505
The Deadline and How to Avoid Paying
S455 tax is due nine months and one day after the end of the accounting period in which the loan was made.3Legislation.gov.uk. Corporation Tax Act 2010 – Section 455 For a company with a 31 March 2026 year end, that means 1 January 2027, the same date as the normal corporation tax payment.
The cleanest way to avoid the charge is to clear the loan before that deadline. If the participator repays the money, or the company formally releases or writes off the debt, within the nine-month window, the charge is reduced by the cleared amount and no s455 is owed on it.5HM Revenue & Customs. Company Taxation Manual – CTM61610 Many directors vote themselves a dividend inside the window to clear the loan account.
Late payment attracts interest at HMRC’s standard corporation tax late-payment rate, which accrues daily from the due date and stood at 7.75 percent per annum in early 2026. Filing the return late can also bring fixed penalties, plus tax-geared penalties of up to 10 percent of unpaid tax at six months late and a further 10 percent at twelve months.
The Anti-Avoidance Rules
Repaying a loan just before the deadline and then borrowing the same money back a few days later is a tactic HMRC calls “bed and breakfasting.” Two rules block it.
The 30-Day Rule
Section 464ZA applies a mechanical test: if, within any 30-day period, a participator repays £5,000 or more and takes out a new loan of £5,000 or more, the repayment is matched against the new loan rather than the original one. The company loses s455 relief on the earlier loan to the extent of the new borrowing.6HM Revenue & Customs. Company Taxation Manual – CTM61630 The window runs from 30 days before the end of the accounting period through to nine months and 30 days after it ends.
The Arrangements Rule
Section 464A is broader, with no time limit and no minimum threshold. Where the main purpose of an arrangement is to avoid or reduce a s455 charge, or to give the participator a tax advantage, HMRC can impose a charge at the dividend upper rate on the value of the benefit.7Legislation.gov.uk. Corporation Tax Act 2010 – Section 464A GOV.UK guidance singles out loans over £15,000 where a replacement loan is arranged at the time of repayment as an obvious trigger.8GOV.UK. Director’s Loans – If You Owe Your Company Money
What the Director Pays Personally
The s455 charge sits with the company, but the director has two separate personal tax exposures to think about.
Benefit in Kind While the Loan Is Outstanding
If a shareholder-director owes the company more than £10,000 at any point during the tax year, the loan is treated as a benefit in kind.8GOV.UK. Director’s Loans – If You Owe Your Company Money The taxable benefit is worked out using HMRC’s official rate of interest, which is 3.75 percent from 6 April 2026.9GOV.UK. Beneficial Loan Arrangements – HMRC Official Rates The company deducts Class 1 National Insurance and reports the benefit on the director’s P11D; the director reports it on Self Assessment and pays income tax on the deemed interest.
Loans of £10,000 or less throughout the tax year escape the benefit-in-kind charge, but s455 corporation tax still applies to any amount left outstanding at the nine-month point, whatever the size.
If the Loan Is Written Off
Writing off the loan changes the picture. The director pays income tax on the full written-off amount through Self Assessment, and the company deducts Class 1 NIC through payroll.8GOV.UK. Director’s Loans – If You Owe Your Company Money The company can still reclaim the s455 it paid, but the combined income tax and NIC bill often makes a write-off more expensive than simply collecting the money.
Reporting on the Company Tax Return
The s455 liability goes on form CT600A, the supplementary page to the Company Tax Return covering close company loans and arrangements that confer benefits on participators.10GOV.UK. Completing the CT600A Page for Close Company Loans and Arrangements to Confer Benefits on Participators It asks for the total amount of each loan made during the period, the name of each participator or associate who received a loan, the dates of any repayments made before the filing deadline, and the rate applied.
The form separates loans made in the current period from repayments received before the nine-month deadline, and the company only pays s455 on the net amount still outstanding. Sloppy bookkeeping here means either overpaying and waiting months for a correction, or underpaying and facing interest.
Reclaiming the Tax
Once the loan is repaid, released, or written off, the company can get the s455 tax back. Section 458 provides the relief, and the timing rules are strict.11Legislation.gov.uk. Corporation Tax Act 2010 – Section 458
If the loan is cleared within the same accounting period in which it was made, and before the nine-month deadline, the company just reduces the charge on its CT600A. No separate claim is needed. If repayment happens in a later accounting period, the company has to wait until nine months and one day after the end of that later period before it can claim relief.11Legislation.gov.uk. Corporation Tax Act 2010 – Section 458 That waiting rule is what ties up the cash.
Claims go through HMRC’s online L2P service using a Government Gateway login; agents use their agent services credentials.12GOV.UK. Reclaim Tax Paid by Close Companies on Loans to Participators (L2P) HMRC does not publish a standard processing time; its guidance says only that a revised tax calculation and payment will follow a valid claim. The statutory deadline for claiming is four years from the end of the financial year in which the repayment, release, or write-off happened.11Legislation.gov.uk. Corporation Tax Act 2010 – Section 458 Miss that four-year window and the s455 becomes a permanent cost, which on a larger loan can run to tens of thousands of pounds.