Interest rate for employment related loans
The official rate of interest on an employment related loan is to be reduced to 4% (from 4.75%) with effect from 6 April 2010. The interest rate is used to calculate the benefit in kind where directors or employees earning more than £8,500 per year are provided with an interest free or low interest loan by reason of their employment.
The benefit in kind will be applicable where a loan is provided at an interest rate of less than 4%. In addition employers must also pay Class 1A national insurance premiums.
The statutory instrument which initiates this change was laid before Parliament on 24 February 2010 and will come into force on 6 April 2010.