8.10. Beneficial loans (a)
A beneficial loan is one made to an employee below the o
ffi
cial rate of interest (2% for
2022/23).
(b)
The benefit is the interest on the loan at the o
ffi
cial rate, less any interest actually paid by the
employee.
(c)
There is no benefit if the loans do not exceed £10,000 in total at any time in the tax year.
(d)
The benefit is calculated using the average method or the accurate method.
Average method . This uses the loan outstanding at the beginning and the end of the tax year.
If the loan is taken out or paid back during the tax year, that date is used instead of the
beginning or end the tax year.
Accurate method This calculates benefit day by day on the balance actually outstanding.
Either the taxpayer or HMRC can decide to use the accurate method.
Example 6 Jack was given a loan of £35,000 by his employer on 31 March 2022. Interest is payable on the loan
at 1% p.a. On 1 June 2022 Jack repaid £5,000 and on 1 December 2022 a further £15,000. The
remaining £15,000 was still outstanding on 5 April 2023. Jack earns £30,000 p.a.
Calculate the taxable benefit for 2022/23 under: (a) the average method and (b) the accurate method You should assume that the o ffi cial rate of interest is 2% p.a.
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9. PAYE system
