Director's loan account reporting could soon work very differently. For most founder-directors, the account is something that gets tidied up when the accounts are drafted. HMRC has been asking whether it should be reported, transaction by transaction, as it happens.
Nothing has been decided. But the direction is clear enough that it's worth getting your records ready before the rules ask you to.
What has HMRC actually proposed on director's loan account reporting?
In March 2026, HMRC and HM Treasury published a consultation called "Reporting company payments to participators". It was announced at the last Budget and closed on 10 June 2026. The government is analysing the responses, and there's no outcome, no start date, and no decision on the form it would take.
The idea is simple. Close companies would report their dealings with shareholders: cash withdrawals, loans, debts, dividends and other distributions, asset sales and purchases, and any other transfer of value. Each entry would carry who, how much and when, along with repayments and any loans released or written off. HMRC leans towards doing this once a year alongside the company tax return, but hasn't ruled out more frequent reporting.
A close company is, broadly, one controlled by five or fewer shareholders, or by shareholders who are directors. HMRC's own wording is that nearly all small companies are close. If you run an owner-managed limited company, this is about you.
What isn't changing?
This isn't a new tax. The existing rule stays exactly as it is: if a loan to a shareholder is still outstanding nine months after the end of the company's accounting period, the company pays a section 455 charge, set by reference to the dividend upper rate. That rate rose to 35.75% this April, which makes an open loan more expensive to leave lying around than it used to be.
What would change is visibility. Today, HMRC mostly sees your director's loan account when a charge arises. Under these proposals, it would see the movements that never trigger one.
Why should founders care before the rules arrive?
Reporting changes tend to expose habits. Personal spending that went through the company and was sorted at year end. A loan taken informally to smooth a quiet month. A balance that has crept up over two years without a plan to clear it.
None of that is necessarily wrong. But when every movement is dated and visible, loose records stop being a year-end tidy-up and start being a question someone can ask. And if you ever sell, a buyer's due diligence team will look at the same account with the same eyes.
What should founders do now?
- Reconcile your director's loan account monthly, not once a year at accounts time.
- Know your accounting year end and work out the nine-month date for every balance you hold. Put it in the diary.
- Decide deliberately how each balance gets cleared: repaid, covered by a dividend, or settled through salary or bonus. Each has a different tax cost, and the dividend route has just got dearer.
- Keep personal and company spending separate wherever you can, and keep a clear note of the purpose behind any loan.
- If you take regular money out of the company, make sure your records show which part is salary, which is dividend and which is a loan. Mixed-up labels are what cause problems later.
Frequently asked questions
What is a section 455 charge?
A tax charge on a close company when a loan to a shareholder is still outstanding more than nine months after the end of the accounting period. It is set by reference to the dividend upper rate, and can be reclaimed if the loan is repaid.
Is HMRC changing the director's loan rules?
Not yet. HMRC has consulted on a new reporting requirement, but no outcome, start date or format has been announced. The section 455 rule itself is not part of the proposal.
What is a close company?
Broadly, a company controlled by five or fewer shareholders, or by shareholders who are directors. HMRC says nearly all small companies are close.
Should I stop using my director's loan account?
Not necessarily. A director's loan account is a normal part of running a company. The sensible step is to keep it reconciled, documented and cleared deliberately, so it stands up to scrutiny whatever the final rules look like.
Clear records are a head start whichever way the final rules land. If your director's loan account hasn't been properly looked at since your last year end, it's a good time to give it a proper once-over as part of your wider tax planning.
Talk to us about getting your director's loan account in order before anyone else asks to see it.
