Interest rate re employment related loans
The official rate of interest on employment related loan is to remain at 4% with effect from 6 April 2011. A change in the rate is only made when there is a significant movement in interest rates.
The interest rate is used to calculate the benefit in kind where directors or employees (earning at the rate of more than £8,500 per year) are provided with an interest free or low interest loan by reason of their employment.
A benefit in kind arises where a loan is provided at an interest rate of less than 4%. In such cases employers must also pay Class 1A national insurance premiums in respect of the benefit.