A Marketing Agency's Guide to Director's Loan Accounts in 2025

Rayhaan Moughal

14.05.2025

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If you're running a marketing agency as a limited company, I'm guessing you've probably taken money out of the business at some point that wasn't a salary or dividend. Maybe it was to cover a personal expense when cash was tight, or perhaps you put some of your own money into the company during a slow period.

This is where Director's Loan Accounts come in. Getting this wrong could cost you thousands in unnecessary tax.

Let me break down what you need to know for 2025.

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What is a Director's Loan Account?

Think of your Director's Loan Account (DLA) as a record of the financial relationship between you (the director) and your agency (the company). It tracks money moving back and forth that isn't:

A salary payment
A legitimate expense repayment
A dividend
Repayment of money you previously lent to the company

I find many agency owners don't realise they even have a DLA until their accountant mentions it, but every limited company director does, and it's crucial to understand how it works.

Why Marketing Agency Owners Need to Pay Attention

Agency cash flow can be unpredictable. You land a big client, have a surge of income, then face a quiet period. This rollercoaster often leads to directors dipping into company funds or putting personal money in to smooth things over.

This is completely fine with proper tracking, but problems arise when these transactions aren't properly recorded or understood.

How Directors' Loans Work in 2025

For the 2025/26 tax year, HMRC has set the official interest rate for Directors' Loans at 3.75% (up from 2.25% in the previous year).

Here's what you need to know about borrowing from your agency:

When You Take Money Out (Borrowing From Your Agency)

If your DLA becomes overdrawn (you owe the company money), you need to be aware of three key deadlines:

The £10,000 threshold: Borrow more than this and it becomes a benefit in kind, reportable on your personal tax return
9 months and 1 day after your accounting year-end: This is the critical deadline! If you haven't repaid by this point, your company faces a 33.75% tax charge on the outstanding amount (Section 455 tax)
The 30-day rule: If you repay the loan but then take out another one of £5,000+ within 30 days, HMRC treats it as if you never repaid the original loan, known as Bed and Breakfasting

For agency owners, that 9-month deadline is particularly important to note in your calendar.

When You Put Money In (Lending To Your Agency)

Many agency founders put personal funds into their business when starting up or during cash flow squeezes. This creates a credit in your DLA, meaning:

You can withdraw this money tax-free at any time
Your company can pay you interest (around market rates, currently up to about 15%)
This interest is tax-deductible for the company if it's at commercial rates
Any interest you receive is taxed as savings income, with the first £1,000 potentially tax-free (or £500 for higher-rate taxpayers)

Common Director's Loan Mistakes I See Marketing Agency Owners Make

1. Using the Company as a Personal Bank Account

Agency owners use their business debit card for personal expenses without keeping track. By the end of the year, they have an overdrawn DLA they weren't even aware of.

Remember: Your agency is a separate legal entity. Every personal expense paid through the company needs recording in your DLA.

2. Not Planning for Repayment

That Section 455 tax (33.75%) is designed to be punitive. While it's refundable once you've repaid the loan, you'll still be out of pocket in the meantime, and your company won't get back any interest paid on this tax.

3. The "Bed and Breakfast" Attempt

Some agency owners try to repay their loan just before the 9-month deadline, then immediately borrow again. HMRC caught onto this with their "bed and breakfast" rules:

The 30-day rule: Take out £5,000+ within 30 days of repayment? The tax applies anyway.
The arrangement rule: Even beyond 30 days, if HMRC can prove you intended to reborrow, they'll still apply the tax.

4. Mixing Up Dividends and Loans

If your agency doesn't have sufficient profits to cover a dividend but you take the money anyway, it automatically becomes a loan, not a dividend. I've seen agencies get into trouble by declaring dividends without checking if they had the profits to support them.

Here’s How You Do It

1. Create a Clear Withdrawal Strategy

Plan how you'll take money from your agency through a mix of:

Regular salary (optimised for tax efficiency)
Dividends (when profits allow)
Director's loans (with clear repayment plans)

This mix will vary depending on your agency's profitability and your personal needs.

2. Track Everything Meticulously

Make sure every transaction between you and the company is properly categorised. This might mean:

Having separate personal and business cards
Implementing proper expense procedures
Regular reviews of your DLA balance

Modern accounting software can help with this — most can even flag personal expenses.

3. Time Your Repayments

If you do need to take a director's loan, plan your repayment before that crucial 9-month deadline. You could:

Vote a dividend specifically to clear the loan (assuming you have profits)
Time larger client payments to allow repayment
Structure your personal finances to enable repayment

4. Use Your DLA Credit Strategically

If your DLA is in credit (the company owes you money), consider:

Setting up regular interest payments as an additional income stream
Using it as a tax-efficient way to extract money from the business
Maintaining it as an emergency fund for the business

Example for a Marketing Agency

Let's say your agency has a year-end of December 31st, 2025:

You take £20,000 from the company in June 2025 to renovate your home office
Your repayment deadline would be October 1st, 2026 (9 months and 1 day after year-end)
If not repaid by then, your company pays £6,750 in Section 455 tax (33.75% of £20,000)
This tax is refundable once you repay the loan, but not the interest on it

Instead, you could:

Plan to vote a dividend in September 2026 to clear the loan (if profits allow)
Put in place a monthly repayment plan from your salary
Refinance with a personal loan if necessary (often cheaper than the Section 455 tax)

Avoid Unnecessary Tax Charges

Director's Loan Accounts are completely legitimate financial tools that can help manage the unpredictable cash flow of agency life. But they need careful handling to avoid unnecessary tax charges.

For 2025, make sure you: