What is the Section 455 tax charge on an overdrawn director's loan?

The section 455 charge is HMRC's way of stopping directors from taking cheap, tax-free loans from their own companies instead of salary or dividends. If your director's loan account is overdrawn at the company's year end and you don't repay it within 9 months and 1 day of that year end, the company pays a 33.75% tax charge on the outstanding balance. That charge falls due at the same time as the company's Corporation Tax bill for the period — it's reported on the CT600, not paid through your Self Assessment. The good news is it's temporary, not a permanent tax: once you repay the loan (or it is written off or released), the company can reclaim the s455 tax. The reclaim isn't instant, though — relief is given 9 months after the end of the accounting period in which the repayment happens, so cash flow planning matters. Also watch out: while the loan stays outstanding, there can be a personal benefit-in-kind charge on you as the director on top.