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What is S455 tax?

Posted 16/07/2018 by Amy Patterson

This tax is usually payable when you live beyond your means! Well not always, but quite often!

S455 tax is essentially a holding tax payable by the company. If your Director’s Loan Account is overdrawn at the end of the company accounting year, and this is not cleared nine months later, then the company must pay 32.5% S455 tax on the remaining loan balance.

This charge is repayable to the company nine months after the end of the company accounting period in which the balance is cleared.

The rule also applies to other shareholders, even if they aren’t directors.

The tax is so high with the hope to deter people from taking money when it isn’t owed to them! The charge is equal to the higher rate tax on a dividend.

Be warned…if an overdrawn Director’s Loan balance is more than £10,000 overdrawn, then a P11d benefit is payable. This would also apply to loans to close relatives of directors.

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