Director’s loans: What could HMRC’s new reporting consultation mean for you?

Director’s loan accounts are one of those things that can feel simple at the time.

You pay for something personally and the company reimburses you. You use the company card by mistake. You take money from the business and plan to sort it out later. You declare dividends at the end of the year and your accountant tidies everything up.

But HMRC is now looking more closely at transactions between small companies and their owners.

The government has opened a consultation on whether close companies should have to report more detailed information about payments and transactions involving their directors, shareholders and other “participators”. The consultation was published on 19 March 2026 and closes on 10 June 2026. (gov.uk)

This does not mean the rules have changed yet. It is still a consultation. But it is a useful nudge for company directors to get their records in better shape now.

What is the consultation about?

At the moment, companies already have to report certain loans to participators, usually through the Company Tax Return and the CT600A supplementary pages where relevant.

HMRC is now considering whether close companies should provide more information about a wider range of transactions between the company and its participators. This could include things like cash withdrawals, loans, debts, dividends, other distributions, asset transfers, and other transfers of value. HMRC has said the high-level details could include the recipient, amount and date of each transaction. (gov.uk)

HMRC wants a clearer picture of money and value moving between a company and the people who own or control it.

Who could this affect?

The consultation focuses on “close companies”. A close company is broadly a company controlled by five or fewer participators, or by any number of participators who are directors. HMRC notes that nearly all small companies are close companies. 

This could be particularly relevant for:

• Owner managed businesses
• Family companies
• One person limited companies
• Companies where directors regularly draw money during the year
• Companies where personal and business spending sometimes overlap
• Companies that leave their director’s loan account to be sorted at year end

Why is HMRC looking at this?

HMRC says the proposals are linked to concerns about the small business tax gap and errors or evasion involving transactions between companies and their owners. In the consultation, HMRC highlights that there is not always a clear practical distinction between company money and personal money in close companies. 

That is something many small business owners will recognise.

It is not always about people deliberately doing something wrong. Sometimes it is simply that records are not kept clearly enough, dividends are declared without enough paperwork, or directors do not realise that taking money from the company has tax consequences.

Questions and answers

Has the law changed yet?

No. This is currently a consultation. The government is gathering views before deciding what, if anything, will be introduced.

Do I need to do anything immediately?

There is no new reporting requirement in place yet as a result of this consultation. But it is a good time to check how well your company records director loans, dividends, reimbursements and personal spending.

Does this only apply to director’s loans?

No. Director’s loans are a big part of the conversation, but the consultation is wider than that. HMRC is looking at transactions between close companies and their participators, which could include loans, cash withdrawals, debts, dividends, distributions, asset transfers and other transfers of value. 

What is a participator?

A participator is someone with a share or interest in the capital or income of a company. In many small companies, this usually means the shareholders.

Will this affect all limited companies?

Not necessarily all companies, but it could affect many small limited companies because the proposals focus on close companies. HMRC says close companies are often family or owner-managed businesses, and that the vast majority are small. (GOV.UK)

What happens if my director’s loan account is overdrawn?

An overdrawn director’s loan account means you owe money to the company. Depending on how long it remains unpaid and the amounts involved, there can be tax consequences for both the company and the director. You should speak to your accountant before year end, not after, so there is time to plan properly.

Can I just declare dividends to clear it?

Sometimes dividends are used to clear a director’s loan account, but they must be done properly. The company needs enough available profits, and the correct paperwork should be in place. Dividends are not just a year-end tidy-up tool.

How directors can get ready

Even though we do not have final rules yet, there are some sensible steps directors can take now.

1. Keep business and personal spending separate

This is the big one. Try not to use the company bank account or company card for personal costs. If it does happen, record it clearly straight away.

2. Review your director’s loan account regularly

Do not leave it until the year end. A monthly check can help you spot issues early and avoid surprises.

3. Keep proper records of every transaction

For money moving between you and the company, make sure you can identify:

• The date
• The amount
• Who received or paid the money
• What it was for
• Whether it was salary, dividend, expense repayment, loan, reimbursement or something else

4. Get dividend paperwork right

If you take dividends, make sure they are supported by board minutes and dividend vouchers. Also check that the company has enough distributable profits before declaring them.

5. Avoid “I’ll sort it later” withdrawals

Taking money out of the company without deciding whether it is salary, dividend, repayment or a loan can create confusion. It is much easier to record things properly at the time.

6. Speak to your accountant before your year end

If your director’s loan account is overdrawn, or you are unsure what you have taken from the company, speak to your accountant before the accounting year ends. That gives you more options.

7. Make sure your bookkeeping software is up to date

Good bookkeeping makes this much easier. If your records are messy, incomplete or full of unexplained transactions, now is the time to tidy them up.

This consultation is not something to panic about, but it is something directors should be aware of.

HMRC is clearly interested in how money moves between small companies and the people who own them. Whether or not all the proposals go ahead, good records will make life much easier.

The best approach is simple. That is to keep company money and personal money separate, record transactions clearly, and do not wait until the year end to find out what your director’s loan account looks like.

If you are unsure where you stand, now is a good time to review your records and get advice before any new reporting requirements arrive.