Your directors' loan account is overdrawn. Here is what it means.

What an overdrawn directors' loan account is, the s455 tax charge, what a liquidator does about it, and what you can still do before and after liquidation.

Directors Lifeline editorial teamLast reviewed 4 November 2026

What a directors’ loan account is

A DLA is the running record of money between you and the company that is not salary, dividend or expenses. Every time the company pays for something personal, or you draw cash without a payslip or a dividend voucher behind it, the DLA goes further into the red. Many directors only find out how overdrawn it is when the accountant prepares the year-end.

Why “overdrawn” matters

Overdrawn means the company is owed money by you. On the balance sheet it is an asset. If the company is solvent that is a tax problem (see s455 below). If the company is insolvent it becomes a recovery target, because a liquidator’s job is to collect the company’s assets for creditors, and you are one of those assets.

The s455 tax charge

If the loan is still outstanding nine months and one day after the company’s year end, the company pays corporation tax at 33.75% of the loan balance under s455 CTA 2010. It is refundable once the loan is repaid, but it is cash out of a company that is probably short of cash already. HMRC checks this on the CT600.

What happens in liquidation

The liquidator writes to you for the balance. If you cannot pay, they will look at your assets, including your home, and they will pursue it; it is one of the few things they are almost always paid to do. They will also check whether any dividends declared to clear the loan were lawful. If the company did not have distributable reserves, those dividends are reclassified as loans and the DLA goes back up.

What you can still do

Before any formal insolvency: repay what you can, agree a repayment plan, check whether reserves genuinely allowed a dividend, and get the accounts right. Do not pay yourself ahead of creditors.
If liquidation is coming: an insolvency practitioner can negotiate a settlement of the DLA as part of the process. The earlier they are involved, the more room there is.
If you cannot repay: there are outcomes other than bankruptcy, but they depend on the figures and on how the loan arose.

What to do this week

Get the current DLA balance from your accountant.
Check the last two years of dividends against reserves.
Talk to a licensed practitioner before you make any payments.

Nothing on this page is advice. We are an information service. When you want someone who can act, we introduce you to a licensed insolvency practitioner. The first conversation is free. The practitioner pays our referral fee; you pay nothing.

Questions directors ask

Can the company write off my loan?

Only if it is solvent and the write-off is properly declared and taxed. In an insolvent company a write-off is a gift to you at the creditors' expense and will be reversed.

Does the liquidator always pursue the DLA?

In practice, yes. It is usually the largest recoverable asset, and it is sitting in the accounts with your name on it.

Can I be made bankrupt over it?

If you cannot pay and no settlement is reached, the liquidator can petition. It is rare where a director engages early and makes a realistic offer.

Guides on this

Talk to a licensed practitioner about my DLA

Five questions. A licensed practitioner matched to your problem will call you, usually within a few hours during the working day. Your details go to that one practitioner and nobody else.