Beneficial tax-exempt loans
16/05/2024

An employee can obtain a benefit when provided with an employment-related cheap or interest-free loan. The benefit is the difference between the interest the employee pays, if any, and the commercial rate the employee would have to pay on a loan obtained elsewhere. These types of loans are referred to as beneficial loans.

There are a number of scenarios where beneficial loans are exempt, and employers might not have to report a benefit to HMRC or pay tax and National Insurance. The most common exemption relates to small loans with a combined outstanding value to an employee of less than £10,000 throughout the whole tax year.

This list also includes loans provided:

  • in the normal course of a domestic or family relationship as an individual (not as a company you control, even if you are the sole owner and employee);
  • to an employee for a fixed and invariable period, and at a fixed and invariable rate that was equal to or higher than HMRC’s official interest rate when the loan was taken out;
  • under identical terms and conditions to those offered to the general public (this mostly applies to commercial lenders);
  • that are ‘qualifying loans’, meaning all of the interest qualifies for tax relief; or
  • using a director’s loan account as long as it is not overdrawn at any time during the tax year.

About us  

Our director-led service is supported by the expertise of our highly skilled staff. We believe that our reputation for technical excellence is one of the main reasons for the company’s continued growth. 

Since the 1960’s we have been looking after the financial needs of our diverse database of clients. The practice of today evolved from two long-established firms originating in Coventry (Luckmans) and Kenilworth (Duckett Parker) merging in 2000.

Our vision in 2000 was to combine the directors' expertise to the greatest advantage for you – our client. That ethos still holds true and has enabled us to build a relationship with our clients that lasts.

Legal

Registered to carry out audit work in the UK and Ireland and regulated for a range of investment business activities by the Institute of Chartered Accountants in England and Wales.

Contact us

LDP Luckmans
1110 Elliott Court, Coventry Business Park
Herald Avenue
Coventry
CV5 6UB

+44 (0) 24 7662 7200
partners@luckmans.com
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