Your director's loan account, explained
If you've taken more money out of your company than you've put in, other than as salary or dividends, your director's loan account is overdrawn. For most small companies, that can mean the company has to pay tax to Revenue on the amount until it's repaid.
What a director's loan account is
It's the running record of money between you and your company that isn't salary, dividends or expense claims. If you've lent the company money, the account is in credit: the company owes you. If you've taken money out, it's overdrawn: you owe the company.
Why an overdrawn account matters
Most owner-managed companies are close companies, meaning they're controlled by five or fewer people or by their directors. When a close company lends money to a shareholder, section 438 of the Taxes Consolidation Act 1997 treats the loan as if the company had made a payment with income tax deducted. The company must pay Revenue income tax at the standard rate on the grossed-up amount. At 20%, that's 25% of the loan.
The tax can generally be reclaimed when the loan is repaid, but in the meantime it's real money out of the company. Company law also restricts loans to directors above certain limits.
Dealing with it at year end
- Repay the balance before the year end, or soon after.
- Clear it with a salary or bonus through payroll, taxed in the normal way.
- Clear it with a dividend, if the company has enough distributable reserves. See our dividends guide.
Each option has a different tax cost, so it's worth deciding before the year end, not after.
We'll flag it
We review the director's loan account as part of every set of accounts, and our pre-year-end tax planning review looks at the best way to clear it.
Last checked 13 November 2026. This guide is general information, not advice for your company. Tax rules change, so check with us or Revenue before acting.