Beneficial loan

A cheap or interest-free loan from an employer is a taxable benefit. ⚠ The benefit is the interest not charged, not the loan — so a £20,000 interest-free loan is worth a few hundred pounds of taxable benefit, not £20,000.

⚠ The exemption is all-or-nothing

Below the threshold there is nothing to report at all. A pound over it and the whole loan becomes chargeable, not just the excess. So a £10,001 loan is taxed on the official rate applied to all of it, while a £9,999 loan is taxed on nothing — a cliff of a few hundred pounds for one pound of borrowing.

The threshold is against the total of all loans from that employer through the year, so a second small loan can push a first one into charge.

Interest you pay comes off

Pound for pound. A loan charged at the official rate or above is not a benefit at all, which is the simplest way for an employer to make one without a tax consequence.

The official rate is set by HMRC

Not by the Bank of England, and not by the lender. It is normally fixed for the tax year, though it can be revised mid-year — which is why the rate shown above carries its own dated source rather than being written into this page.

What this does not cover

Loans written off, which are taxed as earnings rather than as a benefit and carry National Insurance too. The alternative precise method, which averages the balance daily rather than over the year and which either party can insist on. Loans to a director's participator company, which run into a separate charge on the company. Qualifying loans, where interest would have been deductible anyway. And employer's National Insurance on the benefit, which is the employer's cost.

Where these figures come from

Every rate above is read from a dated rate file rather than written into the page, and each one is checked against the gov.uk page it came from. How these numbers are kept right sets out the whole process.

Company car tax