If a company lends money to a director, gives a director credit, or guarantees a director’s personal borrowing, the accounts must say so, even for the smallest micro-entity. In FRS 105 accounts in Tax Optimiser this is note 1, "Advances and credit, including terms and interest rates".
What this note shows
Section 413 of the Companies Act 2006 requires the notes to disclose:
- Advances and credits to directors: the amount, an indication of the interest rate, the main conditions, and any amounts repaid, written off or waived.
- Guarantees entered into on behalf of directors: the main terms, the maximum amount the company could have to pay, and any amount it has actually paid.
The disclosure covers anyone who was a director at any time during the year. It is required in micro-entity accounts too, where it is one of the few notes printed under the balance sheet. If the company made no advances and gave no guarantees, leave both sections switched off.
A common confusion: a director personally guaranteeing the company’s bank loan is the opposite arrangement. The director is supporting the company, not the company supporting the director, so it is not a s413 disclosure. You can mention it voluntarily, usually in the Guarantees and other financial commitments note, but it does not belong in "Guarantees and their terms".
Where the figures come from
Both sections are text you write. Nothing is pulled from the trial balance. Take the figures from the director’s loan account in your records: the balance brought forward, amounts advanced in the year, amounts repaid, and the balance at the year end. In the trial balance the year-end balance owed by a director usually sits in a director’s loan account within debtors. Check that the amount outstanding in your wording agrees to it.
If the director owes the company money at the year end, there may also be a corporation tax charge under s455. See CT600A loans to participators.
Completing the note in Tax Optimiser
Go to View Accounts > Notes. Under "Advances and credit, including terms and interest rates" there are two sections:
- Advances Credits To Directors Including Terms Interest Rates: loans and credit to directors.
- Guarantees and their terms: guarantees the company has given for a director’s obligations.
For each section, set Show this note in the accounts to Yes, then type the wording or click Use Template. In the demo company, Alex Morgan was advanced £3,000, interest free, which was still outstanding at 31 March 2025:
The guarantee section records a guarantee of Sam Patel’s personal overdraft:
Click Save changes to update the accounts.
Wording templates
{{DirectorName}} is filled in automatically when the company has one current director, and chosen from a list when it has more. {{EndDate}} becomes the period end date. You are asked for the other values. Type amounts without the £ sign.
Advances and credits section
- Interest-free loan, outstanding at year end: an interest-free loan repayable on demand with a balance at the year end. Asks for {{LoanAmount}} and {{AmountOutstanding}}.
- Interest-free loan, repaid in year: an interest-free loan repaid in full before the year end. Asks for {{LoanAmount}}.
- Interest-bearing loan: a loan on which interest is charged. Asks for {{LoanAmount}}, {{InterestRate}}, {{InterestCharged}} and {{AmountOutstanding}}.
- Loan from director: money the company owes to a director. Asks for {{AmountOwed}}. This is not an advance to a director and is not a s413 disclosure; use it only if you want to mention the balance voluntarily.
Guarantees and their terms section
- Guarantee on behalf of a director: the company has guaranteed a director’s personal obligation. Asks for {{GuaranteeAmount}} and {{GuaranteeTerms}}. This is the s413 wording.
- Personal guarantee by director: a director has guaranteed the company’s bank borrowings. Asks for {{GuaranteeAmount}}. As explained above, this is not a s413 guarantee. If you want to include it, it fits better in the Other financial commitments section of the Guarantees and other financial commitments note.
The templates describe a single loan. If there were several advances, more than one director, or amounts written off or waived, edit the wording to cover each one. For example: "Amounts of £2,000 owed by Alex Morgan were waived during the year."
How it appears in the accounts
The note prints beneath the balance sheet under "NOTES TO THE ACCOUNTS", headed "Advances and credit, including terms and interest rates". The two sections print one after the other under that heading. A section switched to No is left out.
Frequently asked questions
Do micro-entity accounts have to disclose directors’ loans?
Yes. Section 413 of the Companies Act 2006 applies to micro-entities. Advances and credits to directors, and guarantees given on their behalf, must be disclosed in a note beneath the balance sheet.
What if the director repaid the loan before the year end?
It still needs disclosing, because the advance was made during the year. Use the Interest-free loan, repaid in year template, or adapt the interest-bearing one.
Is a director’s personal guarantee of the company’s bank loan a s413 guarantee?
No. Section 413 covers guarantees the company gives on behalf of a director. A director guaranteeing the company’s debts can be mentioned voluntarily, but not as a s413 disclosure.
Does the company owing money to a director need to go in this note?
No. This note covers money the company has advanced to directors. A loan from a director is not an advance or credit to them.
Is there tax to pay on an overdrawn director’s loan account?
Possibly. A loan still outstanding nine months after the year end can trigger a s455 charge on the company. See CT600A loans to participators.
Where to go next
- Accounts notes: a note-by-note guide
- Previous: Other financial commitments
- Next: Guarantees and other financial commitments (FRS 105)
- FRS 102 Section 1A equivalents: Loans to directors and Guarantees provided on behalf of directors
- CT600A loans to participators (s455 tax)
- FRS 105 notes