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Official rate of interest for loans from employer to employee

The average &#34official rate&#34 of interest, used to calculate the taxable benefit from a loan made by an employer to an employee, is to be 6.25 per cent from 6 March 1999 to bring the rate broadly in line with typical mortgage rates.


If an employer makes a cheap loan to a higher paid employee or a director then the official rate is used to measure the benefit to the employee. The benefit is the difference between the rate paid and the official rate of interest.


There is a de minimis provision which operates so that if the loan at no time in the year exceeds £5,000 no tax charge is made.


It is important to remember that any chargeable amount under this provision would be pensionable for personal pension purposes and, provided the scheme rules permit it, for occupation pension purposes.

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