Exempt beneficial loans
08/04/2021

An employee can obtain a benefit when provided with an employment-related cheap or interest-free loan. The benefit is the difference between the interest the employee pays, if any, and the commercial rate the employee would have to pay on a loan obtained elsewhere. These types of loans are referred to as beneficial loans.

There are a number of scenarios where beneficial loans are exempt and employers might not have to report anything to HMRC or pay tax and National Insurance. The most common exemption relates to small loans with a combined outstanding value to an employee of less than £10,000 throughout the whole tax year. 

The list also includes loans provided:

  • in the normal course of a domestic or family relationship as an individual (not as a company you control, even if you are the sole owner and employee)
  • to an employee for a fixed and invariable period, and at a fixed and invariable rate that was equal to or higher than HMRC’s official interest rate when the loan was taken out
  • under identical terms and conditions to the general public as well (this mostly applies to commercial lenders)
  • that are ‘qualifying loans’, meaning all of the interest qualifies for tax relief 
  • using a director’s loan account as long as it’s not overdrawn at any time during the tax year.


                                                                                                                                                                                                                           

                                                

Kent Office

42A High Street
Broadstairs
Kent
CT10 1JT

Tel: 01843 861188
info@kempsaccounting.co.uk

Hamble Office

9 Kingfisher Close,
Hamble,
Southampton,
S031 4PE
07887 578 298
info@kempsso.co.uk

London Office (By Appointment Only)

Kemp House
152-160 City Road
London
EC1V 2NX
07887 578 298
info@kempsaccounting.co.uk

Follow Us

Follow us on    INed1

Kent Office     

Hamble Office