When a P11D charge applies for a director’s loan account

Summary

Scenario	P11D Required?	Tax Impact
Loan over £10,000 & interest below 2.25%	Yes	BIK + Class 1A NIC
Loan over £10,000 & interest at or above 2.25%	No	No BIK
Loan under £10,000	No	No BIK or reporting

If the director owes more than £10,000 to the company at any point during the tax year, and no or insufficient interest is paid on the loan, then:

The loan is treated as a beneficial loan by HMRC — i.e., a cheap loan from the company to the director.

As a result:

• The company must:
  • – Report it on a P11D as a taxable benefit-in-kind (BIK).
  • Pay Class 1A National Insurance on the value of the benefit (currently 13.8%).

• The director must:
  • Include the benefit on their personal tax return, and pay income tax on it.

Key Conditions:

• The £10,000 limit is the total amount owed at any point in the tax year (even for one day).
• If the director pays the HMRC-approved interest rate (official rate = 2.25% for 2024/25), then no BIK arises and nothing needs to go on a P11D.
• If the loan is under £10,000, no BIK and no P11D is required.

Additional Considerations:

• If the loan isn’t repaid within 9 months after year-end, a Section 455 tax charge (33.75%) may also apply.
• Repeated repaying and re-borrowing (known as “bed and breakfasting”) may be caught by anti-avoidance rules.