The Director's Loan Account in a Consultant's Medical Company: s.455, s.458 and the 2026/27 Rules

Consultants running private work through a limited company regularly draw cash as and when the company account permits, without pausing to pass a dividend resolution or run a payroll. The director's loan account that results can look harmless on a bank statement, but it sits as a loan from the company to the director under company-law and tax rules. An overdrawn director's loan in a close company triggers a Corporation Tax Act 2010 section 455 charge at the dividend upper rate on the balance outstanding nine months and one day after the accounting period end: 33.75% on loans made in 2025/26, rising to 35.75% on loans made on or after 6 April 2026. The charge is repaid under s.458 once the loan is cleared, but the relief is deferred by up to a further year, not refunded on the spot. Add the beneficial-loan benefit in kind on balances above £10,000 and the anti-avoidance rules that block the obvious workaround, and the DLA is one of the more expensive mistakes to stumble into in a medical company. This guide covers the full picture, with 2026/27 figures and a worked example.

When a director's loan account arises in a medical company

Every limited company keeps a director's loan account as an internal balance between the company and its director-shareholder. The account has two possible states. When the director puts money into the company (start-up capital, an expenses reimbursement owed to them, or a formal loan) the DLA is in-credit: the company owes the director. When the director takes money out other than as declared salary or voted dividends, the DLA goes overdrawn: the director owes the company.

In a consultant's private-practice company the account tips overdrawn because cash builds up and the consultant draws it as needed without always pausing to vote a formal dividend. A dividend requires distributable profits, a board resolution and, in a single-director company, some minimal paperwork. When cash simply leaves the company account and arrives in the director's personal account without that step, the movement defaults to a loan.

One important structural point applies before the DLA mechanics even arise. A limited company cannot hold an NHS GMS or PMS contract. The company is therefore a vehicle for private work only: insurance medicals, self-pay clinics, medico-legal and expert-witness reporting, occupational health, and locum work through a personal service company that is outside IR35. NHS partnership income and NHS employment pay cannot be incorporated. Anyone modelling the DLA picture for a medical company is looking at the private-income side of a consultant's career, not the NHS side. For the broader incorporation question, see our guide on the tax benefits and drawbacks of a medical limited company.

Overdrawn vs in-credit: the two directions and why the direction matters

The direction of the balance is everything for tax. The table below shows the key differences at a glance.

	Overdrawn DLA (director owes company)	In-credit DLA (company owes director)
s.455 charge on the company	Yes, at dividend upper rate on balance at 9 months + 1 day after period end	None
Beneficial-loan benefit in kind	Yes, if balance exceeds £10,000 at any point in the tax year	Not applicable
P11D / employer Class 1A NIC	Required where BIK arises	Not required
Tax when director repays or draws down	No income tax on repayment by director; but s.455 cost already incurred by company	Tax-free: a return of the director's own capital
s.458 relief timing	Deferred to 9 months + 1 day after the accounting period of repayment	Not applicable

The in-credit position is the more comfortable one. We return to how to build and use an in-credit balance later in this guide.

The s.455 charge (close company, dividend upper rate, 9 months and 1 day)

A consultant's medical company is a close company within CTA 2010 because it is controlled by five or fewer participators (almost always just the consultant and any family shareholders). Section 455 of that Act imposes a charge on the company equal to the dividend upper rate applied to the outstanding balance of any loan made to a participator, measured nine months and one day after the end of the accounting period in which the loan was made. The charge is not personal income tax on the director: it is a company-level charge, included in the Corporation Tax return and paid with the company's tax bill. Normal HMRC late-payment interest and penalties apply if it is missed.

The rate by date band (33.75% for 2025/26, 35.75% from 6 April 2026)

The section 455 rate is set at the dividend upper rate and moved up for 2026/27 alongside the Finance Act 2026 dividend-rate increase:

• Loans made in 2025/26 (6 April 2025 to 5 April 2026): 33.75%. This was the dividend upper rate for 2025/26.
• Loans made on or after 6 April 2026: 35.75%. Finance Act 2026 (s.4) raised the dividend ordinary rate to 10.75% and the upper rate to 35.75% from 6 April 2026. The s.455 rate tracked that rise.

The rate is fixed by when the loan was made, not when the charge falls due. A loan drawn in March 2026 (a 2025/26 loan) carries the 33.75% rate even if the nine-month-and-one-day deadline falls in 2027. A loan drawn in May 2026 carries 35.75%. This distinction matters for a company whose year-end straddles the 6 April 2026 date and whose director drew cash in the months either side of it.

Getting the money back: s.458 relief and why it is deferred, not instant

Section 458 of CTA 2010 allows the company to reclaim the section 455 tax once the loan is repaid (or written off and assessed as income in the director's hands). But "reclaim" does not mean "refund as soon as the loan is settled". The relief is deferred to nine months and one day after the end of the accounting period in which the loan is repaid. The company has a four-year window from that date to make the claim.

In practice, this creates a two-charge window of up to 12 months. A company with a 31 March year-end, with a loan outstanding at 31 March 2027, pays the s.455 charge on 1 January 2028. If the director repays the loan during the year ending 31 March 2028, the s.458 refund becomes available on 1 January 2029. The company has laid out the charge in January 2028 and does not recover it until January 2029. That 12-month gap is a real cost of capital that a back-of-envelope s.455-rate comparison misses entirely.

The bed-and-breakfasting anti-avoidance rules (30-day rule and arrangements rule)

The obvious response to the deferred s.458 refund is to repay the loan shortly before the nine-month-and-one-day deadline, claim the refund, and redraw immediately after. CTA 2010 sections 464C and 464D block this in two ways:

• The 30-day rule: where a loan of £5,000 or more is repaid and a new loan of £5,000 or more is drawn within 30 days, the s.458 relief is denied on the amount matched to the new loan. The round-trip is treated as if the repayment never happened for relief purposes.
• The arrangements rule: where, at the time of repayment, arrangements already exist to make a new loan, the relief is denied regardless of whether 30 days have elapsed. Intent matters, not just the calendar. A pre-agreed plan to redraw after 31 days still falls within the rule.

These are statutory provisions, not merely HMRC practice. A repayment that is genuine, with no prior plan to redraw, qualifies for relief. A circular transaction does not.

The beneficial-loan benefit in kind (loans over £10,000, official rate, P11D and Class 1A)

A separate charge runs alongside the s.455 charge for larger overdrawn balances. Under ITEPA 2003 s.175, if the outstanding overdrawn DLA balance exceeds £10,000 at any point in the tax year, HMRC treats the absence of market-rate interest as a taxable benefit in kind. This is assessed under the employment-income rules on the director personally, not through the company's Corporation Tax account.

The benefit is calculated using the HMRC official rate for the relevant tax year (published annually at gov.uk), applied to the average outstanding balance across the year. The company reports it on a P11D by 6 July following the end of the tax year. The company also pays employer Class 1A National Insurance (15% from 6 April 2025) on the taxable value of the benefit, due by 19 July following the tax year. The director pays income tax on the benefit at their marginal rate (20%, 40% or 45% for 2026/27) via self-assessment.

Two practical points follow. First, the BIK and the s.455 charge are independent: both can arise in the same year on the same overdrawn balance. The s.455 charge falls on the company account; the BIK falls on the director personally. Second, the £10,000 de minimis is not a safe planning threshold for serial borrowing. Drawing just under £10,000 each time to avoid the BIK, while maintaining a persistent overdrawn balance, is a pattern HMRC looks at in the context of the loans-to-participators rules as a whole.

Worked example: a consultant overdraws £40,000

Take a consultant whose private-practice company has a 31 March year-end. On 1 July 2026 the consultant draws £40,000 from the company account informally, without declaring a dividend. The full £40,000 sits as an overdrawn DLA balance at the year-end on 31 March 2027. Below is the resulting tax timetable.

Item	Figure	Notes
Overdrawn DLA at 31 March 2027	£40,000	Drawn 1 July 2026 (on or after 6 April 2026)
s.455 rate applicable	35.75%	Dividend upper rate for 2026/27 loans (FA 2026 s.4)
s.455 charge	£14,300	Due 1 January 2028 (9 months + 1 day after 31 March 2027)
Beneficial-loan BIK (2026/27)	HMRC official rate × average balance	Balance exceeded £10,000; P11D by 6 July 2027; employer Class 1A NIC at 15% due 19 July 2027
Loan repaid in full during year to 31 March 2028	£40,000 returned	Assume repaid 1 October 2027
s.458 relief available from	1 January 2029	9 months + 1 day after 31 March 2028; company has paid £14,300 and waits ~12 months to recover it

The headline figure is stark: an informal £40,000 draw creates a £14,300 company charge due in January 2028. Even with prompt repayment, the s.458 refund does not arrive until January 2029. In that 12-month gap the company has £14,300 tied up with HMRC as well as the BIK reporting obligations and the Class 1A NIC cost.

Now compare this to declaring the same £40,000 as a dividend in January 2027, when the company's distributable profits were clear. Dividend income in 2026/27 is taxed on the consultant personally at 10.75% (basic rate), 35.75% (higher rate) or 39.35% (additional rate) after the £500 allowance. A higher-rate taxpayer taking £40,000 as a dividend faces income tax of roughly 35.75% on £39,500 (after the allowance), approximately £14,121. The income-tax cost is similar in headline percentage terms to the s.455 charge, but the dividend route is transparent, involves no deferred-refund cycle, triggers no P11D or Class 1A NIC obligation, and is resolved in the tax year it arises. The loan route does not save tax; it defers it badly.

Using an in-credit loan account instead

The cleanest DLA strategy is building a genuine in-credit balance rather than allowing an overdrawn one to arise. An in-credit DLA most commonly comes from two sources:

• Introduced capital: the consultant lends money to the company at formation or later (start-up capital, working-capital loans or expenses reimbursed late). The company owes that sum and the director can draw it back at any time, tax-free, because it is a return of their own capital.
• Section 162 incorporation consideration: when a private practice is incorporated using section 162 incorporation relief, part of the consideration for the transfer of the business can be structured as a credit to the DLA rather than being taken wholly in shares. The company then owes the director that amount, and they can draw it down without income tax because it is a debt settlement, not income. The trade-off is that each pound taken outside shares reduces the proportion of the gain that can be deferred under s.162. Our guide on section 162 incorporation relief explains the apportionment in detail.

An in-credit DLA is repaid free of income tax, NIC and any s.455 charge, making it a useful and low-friction drawdown route once the balance exists. The discipline is simply ensuring the credit is genuine (documented as a loan or as incorporation consideration) and not inflated.

The NHS pension angle (loan-account drawdown is not pensionable, dividends never are)

The NHS pension point sits alongside every extraction decision in a medical company. A limited company cannot hold an NHS contract, and all company-derived income (including dividends and any amount drawn from a DLA) falls outside the NHS pension. Director's loan account drawings are neither salary nor dividends; they are a debt repayment and generate no pensionable pay under any NHS certification mechanism.

This matters because the full cost of managing private income through a company includes both the tax position and the pension-accrual position. Every pound retained in the company earns no NHS pension. For a consultant whose NHS post is the only pensionable income, a decision to draw cash as a loan rather than as salary or as an employer pension contribution carries a double cost: the s.455 charge on the one hand, and zero pension accrual on the other.

Employer pension contributions paid directly from the company are a materially better alternative for many higher-earning consultants. They are deductible for corporation tax on a paid basis, carry no NIC, and are subject to the annual allowance of £60,000 for 2025/26, tapering where threshold income exceeds £200,000 and adjusted income exceeds £260,000 (down to a minimum of £10,000). For a consultant managing the annual allowance taper, routing the equivalent amount through a company pension contribution rather than an informal draw avoids the s.455 charge entirely and reduces the corporation tax bill. See our guide on pension contributions and tax relief for the annual allowance mechanics in a medical context.

Common mistakes doctors make with a director's loan account

• Drawing informally without a board resolution. Every cash transfer that is not salary or a formally declared dividend defaults to a loan and lands in the DLA as overdrawn. Most consultants discover the overdrawn balance when the accountant prepares the year-end accounts, by which point the nine-month-and-one-day clock is already running towards the s.455 due date.
• Missing the £10,000 threshold and the P11D obligation. The beneficial-loan BIK can arise mid-year if the balance creeps above £10,000 incrementally. A missed P11D and unpaid Class 1A NIC attract penalties and interest that compound the original problem.
• Treating the s.458 refund as automatic and immediate. The refund is deferred: available nine months and one day after the accounting period of repayment. Cash-flow plans that assume immediate recovery will be wrong, sometimes materially so.
• Attempting a repay-and-redraw cycle. The 30-day rule and the arrangements anti-avoidance provisions deny s.458 relief on round-trip transactions. This is not a grey area.
• Comparing only the s.455 rate to the dividend rate. The full comparison must include the deferred-refund cost of capital, the BIK reporting overhead, the Class 1A NIC, and the NHS pension accrual that is forgone on any income left in the company rather than drawn as salary through an NHS post or invested via an employer pension contribution.
• Overlooking the corporation tax position on interest. If the company charges the director interest on the overdrawn DLA (to avoid the BIK), that interest is assessable as income on the director and deductible for the company, creating its own reporting obligations. Most directors simply pay the BIK rather than set a formal interest rate.

How we help consultants manage the loan account

A director's loan account is one of the more avoidable tax costs in a medical company: a straightforward system of declaring dividends properly, reconciling the DLA balance monthly and planning extraction around salary, dividends and employer pension contributions removes most of the risk entirely. The s.455 charge, the beneficial-loan reporting and the s.458 timing all follow from one prior decision: whether cash is drawn as a loan or as a properly declared distribution. We work with consultants running private work through a company to set up that system, model the cleanest 2026/27 extraction mix (salary near the £5,000 secondary NIC threshold, topped up with dividends at the new 10.75% and 35.75% rates, with employer pension contributions as the third lever), and make sure the DLA does not silently accumulate until year-end. If you would like to talk through your director's loan account position or the broader extraction picture for your private-practice company, the short form below is the place to start.