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Tax on interest-free employer loans

My employer has offered to give me an interest-free loan to purchase an annual rail fare ticket costing £3,500. Will I have to pay tax on the loan?

Strictly, the taxable benefit on cheap or interest-free loans is the difference between any interest paid and the interest payable at the ‘official rate’ (currently 2.50%). However, there is no charge where the total of all beneficial loans made to an employee do not exceed £10,000 at any time in the tax year. If this is the only loan you have from your employer, you will not need to pay tax on the benefit. However, it is worth noting that tax is charged on the amount written off of any loans, whether or not the recipient of the loan is still employed. If you are a shareholder of a company with five or fewer shareholders, there will be tax consequences to consider (The ‘section 455 charge’).

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