Beneficial loans

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Where an employer provides loans to employees (or their relatives) this will generally need reporting on a Form P11d.

The taxable benefit is usually equal to the notional interest on the loan at the official rate (currently 2.5% per annum) less any interest actually paid by the employee. However, if the loan is made, after 6 April 2017, by way of a salary sacrifice arrangement and the salary sacrificed is greater than the cost of the loan then the salary sacrificed is taxed instead.

It should be noted that some loans are exempt, including loans:

  • with a combined outstanding value of less than £10,000;
  • that carry an interest charge at a rate higher than the official rate;
  • under identical terms and conditions to the general public as well (this mostly applies to commercial lenders); and
  • that are ‘qualifying loans’, meaning all of the interest qualifies for tax relief (a complex area).

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