Most directors never see their director’s loan account in FreeAgent as a single number, because there is not one place it lives. FreeAgent builds it at the year end from several accounts, and an overdrawn balance can appear from transactions you never thought of as a loan.
This guide covers how FreeAgent handles it. For the tax rules themselves, the rates, the nine month window and getting S455 back, see our full guide to the overdrawn director’s loan account and S455.
How FreeAgent works out your loan account
FreeAgent’s help on the director’s loan account explains that at the year end it adds together these accounts for each director:
- Payments to and from you, the money that moves between the company and you personally.
- Net salary and bonuses owed to you.
- Benefits in kind.
- Your expense account, for expenses you paid personally and claimed back.
- The director loan account itself.
Share capital is left out. The total is your director’s loan account. A credit balance means the company owes you money. A debit balance means you owe the company, and that is an overdrawn loan account.
The practical point is that money drawn from the company and explained as a payment to you, without a salary or dividend behind it, quietly builds the debit side. So does a personal purchase on the company card.
What an overdrawn balance means
If your loan account is still overdrawn nine months after the end of the accounting period, the company pays S455 tax on what is outstanding. The rate is 35.75 per cent for loans made on or after 6 April 2026, and 33.75 per cent for loans made between 6 April 2022 and 5 April 2026. It is set by when the money was drawn, not when you repay it.
Clear it within the nine months and there is no S455 to pay. Leave it, and the tax is due on the same date as your corporation tax. It comes back once the loan is repaid, but not quickly: the refund is due nine months and one day after the end of the period in which you repaid it.
What FreeAgent does on the tax return, and what it does not
If the total is a debit at the year end, FreeAgent automatically ticks the box on the CT600 that says there were loans to participators, and attaches form CT600A.
What it does not do is fill in the loan amounts. You have to enter those yourself. It also applies whichever S455 rate you choose. So the return can look finished when the most important figures on that page are either blank or depend on your answer.
FreeAgent also cannot file the part of CT600A that reclaims S455 once a loan has been repaid. That claim has to be made another way.
The 35.75% filing catch
This one is new. For loans made on or after 6 April 2026 the rate is 35.75 per cent, but HMRC’s corporation tax online service cannot accept that rate until 6 April 2027. FreeAgent says it cannot file those returns before then.
The tax does not wait. S455 is due nine months and one day after the end of the accounting period, whether or not the return can be filed yet. If your year end falls in 2026 and you drew money from the company after 6 April 2026 that is still outstanding, plan for the payment on the normal date and the return a little later.
Clearing it in FreeAgent
There are three usual ways out, and each looks different in FreeAgent:
- Repay it. Transfer the money back to the company bank account and explain it against your director account.
- Declare a dividend. If there are distributable profits, a dividend declared and credited to your director loan account clears the debit. In FreeAgent that is a journal debiting the dividend account and crediting your director loan account, with the minutes and voucher behind it. Our guide to dividends in FreeAgent covers the paperwork.
- Pay a bonus. Taxed as salary through payroll, with National Insurance, but it works where there are no profits to support a dividend.
Which is cheapest depends on your other income and the company’s profits, which is a conversation worth having before the year end rather than after it.
Repaying and reborrowing
The tempting move is to repay just before the deadline and draw the money out again afterwards. The 30 day rule stops that working: where £5,000 or more is repaid and £5,000 or more is borrowed again in a later accounting period within 30 days, the repayment is matched to the new loan, and S455 applies to the old one anyway. Above £15,000, if arrangements were already in place to borrow again, the 30 days does not even apply.
One useful exception. The rule does not apply to a repayment that is itself taxed on you, such as clearing the balance with a dividend or a bonus. That is one reason clearing a loan account with a properly declared dividend works where a round trip of cash does not.
The personal tax side
If the loan is more than £10,000 at any point in the tax year and you pay less than the HMRC official rate of interest, 3.75 per cent for 2026/27, there is a benefit in kind on you and Class 1A National Insurance for the company. That is separate from S455, and you can be caught by both.
FreeAgent does not file P11D returns, so if this applies to you, that reporting has to be done outside it.
Sort your loan account before it costs you S455
We spot an overdrawn loan account before your year end, work out the cheapest way to clear it, and complete the CT600A figures FreeAgent leaves blank. We work with limited companies only, inside your own FreeAgent account, so there is nothing to move. Fixed monthly fees from £145 + VAT, covering your year end accounts, corporation tax return and your own Self Assessment.
Book a Free ConsultationOr see our fixed-fee packages. We work with limited companies across Bedfordshire, Hertfordshire, Buckinghamshire and Northamptonshire, and remotely throughout the UK.
Frequently Asked Questions
There is no single account. At the year end FreeAgent adds together several director accounts: payments to and from you, net salary and bonuses, benefits in kind, your expense account and the director loan account itself. Share capital is left out.
Not fully. If your loan account is overdrawn at the year end, FreeAgent ticks the box on the CT600 and attaches form CT600A, but it does not fill in the loan amounts. You have to enter them yourself.
FreeAgent says not before 6 April 2027, because HMRC's online service cannot accept the 35.75 per cent rate until then. The rate applies to loans made on or after 6 April 2026. The tax is still due on the normal date.
Either repay the money to the company bank account, or declare a dividend or bonus and credit it to your director loan account. A dividend needs distributable profits and proper minutes and a voucher.
If the loan is more than £10,000 at any time in the tax year and you pay less than the HMRC official rate of interest, 3.75 per cent for 2026/27, there is a taxable benefit in kind as well as any S455.