Directors' Loan Account Guide
What Is A Directors' Loan Account?
A directors' loan account (DLA) records money moving between a limited company and its director that is neither salary nor a dividend. When the company owes the director, the DLA is in credit — the company is a debtor and the director holds a receivable.
The opposite case — an overdrawn DLA where the director owes the company — can trigger Corporation Tax charges (often discussed as section 455) and other reporting. Kumberi's scenario model focuses on credit balances: money the company still owes back to the director.
How A Credit Balance Can Arise
Opening Balance
An amount already owed to the director at the start of the scenario (for example from prior personal funding recorded in the company's books).
Personal Funds On Company Purchases
When personal money pays for a company purchase (for example an Ltd property or vehicle), the model can record a DLA credit for that funding — the company owes that money back.
Repayments from company cash are modelled as a return of that capital, not as salary or dividend income in the year-loop. Affordability is limited by company cash and the drawdown settings you enter.
What Kumberi Shows
- Opening credit, credits from modelled purchases, annual repayments, and remaining balance year by year
- Links between purchase events and the DLA credit they created, where the simulation records that connection
- How remaining credit interacts with household net worth and retirement DLA policy settings in your scenario
Figures are simulation output from the inputs and timeline you provide — not bank or Companies House data, and not a recommendation to use a DLA.
Official Guidance And Further Reading
- HMRC — Directors' loans
GOV.UK overview of money owed either way between company and director, record-keeping, and related tax topics.
- HMRC Company Taxation Manual — Close companies (CTM61500+)
Technical manual material on close companies and loans to participators (useful context; dense reading).
- Kumberi calculation methodology
How the wider simulation assembles cash, tax, and scenario outputs.
Start from the life question: What If The Company Owes The Director?. Company-car tax context is in the Benefit-in-Kind guide.
Common Questions
What is a directors’ loan account?
A running balance between a close company and a director. If the company owes the director, that is a credit (the director has lent money in). If the director owes the company, the account is overdrawn.
How can a company-funded purchase increase the DLA?
When personal spending is met from company cash, bookkeeping often records that as a loan to the director unless it is salary, dividend or a genuine business cost. Kumberi can increase the modelled DLA when company cash is used for a personal-side purchase.
How is an overdrawn DLA taxed?
If not repaid within nine months and one day of the year end, the company may pay a section 455 charge (currently 33.75% of the outstanding loan). That tax is repaid to the company after the loan is repaid. Benefit-in-kind rules can also apply to cheap or interest-free loans above HMRC’s threshold. See GOV.UK directors’ loans.
Is a DLA repayment the same as a dividend?
No. Repaying a credit DLA returns money the company already owed the director. A dividend is a distribution of profits and is taxed under dividend rules. Mixing them up is a common modelling error; Kumberi treats them as separate cash movements.
Life Decisions That Use These Rules
Methodology first. These pages start from the life question and show what the engine actually applies.
- What If The Company Owes The Director?Credit only: opening balance, purchase injections, repayments that are not dividends.
- Salary Or Dividend For A Ltd Company?DLA drawdown is a return of capital, not an extraction mix.
- Could We Afford This House?Personal cash on a Ltd purchase can increase directors’ loan credit.