Interest rate on employer loans

HMRC has announced that the official rate of interest, for calculating the taxable benefit of cheap loans from employers, will remain at 5% pa. This rate should be in force for the whole of the 2006/07 tax year although, in exceptional circumstances, HMRC has the power to change the rate during a tax year.

The taxable benefit is the officially calculated interest less any actual interest paid by the employee. However, HMRC turn a blind eye if the maximum loan during the year was less than £5,000.