Yes, if your spouse owns shares, a dividend is properly declared and they agree in writing to it being applied to your loan. The dividend remains your spouse's income and is taxed on them. If the balance is cleared within nine months and one day after the company's year end, no section 455 charge arises.
Why people ask
An overdrawn director's loan account costs the company section 455 tax if it is still open nine months and one day after the year end. A dividend is the usual way to close it. If you own few or no shares, or you have already used your own dividend band, the obvious thought is to use a dividend declared to your spouse.
How it works in practice
The company declares a dividend on the shares your spouse owns. With their written agreement, the amount is credited to your loan account instead of being paid to their bank account. Your spouse is taxed as if they had received it. Your loan is reduced by the same amount.
It is still your spouse's money
The tax stays with the person who owns the shares. That is the point of the outright gift rule, and it only works if the shares are genuinely theirs. If the arrangement looks like your own income routed through them, the settlements legislation can bring it back to you.
It also means your spouse has paid your debt. Agree what that is. A gift, or a loan from them to you that you will repay. Write it down. Separations produce disputes about exactly this.
Paperwork that holds up
- A board minute declaring the dividend, dated when it was actually declared.
- A short signed note from your spouse agreeing to the credit going to your loan account.
- A check that the company has enough distributable profits for the whole dividend.
- Dividend vouchers showing the amount and the shareholder.
The cost of leaving it open
If the balance is still outstanding after the deadline, the company pays section 455 tax at 35.75% on loans made from 6 April 2026. It is a deposit, not a permanent cost: the company reclaims it after the loan is cleared, but the reclaim comes later. Writing the loan off is no cheaper, because the amount is taxed on you as a dividend.
Other ways to clear it
You can repay from personal funds, declare a dividend on your own shares, or pay a bonus through payroll. Which is cheapest depends on your other income. See salary or dividends for how the choices compare.
Sources: HMRC manual CTM61510: loans to participators, charging provisions · HMRC manual CTM61505: section 455 rate, 35.75% from 6 April 2026 · GOV.UK: tax on dividends
Frequently asked questions
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