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HMRC internal manual

Employment Income Manual

HM Revenue & Customs
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The benefits code: beneficial loans: amount of the official rate

Section 181(1) ITEPA 2003

The official rate is varied from time to time under Treasury regulations.

From 6 January 2002 the table below gives details of the rates applicable to all loans in sterling and loans in foreign currencies other than those specified in EIM26106.

Period from Period to Official rate
6.1.2002 5.4.2007 5.00%
6.4.2007 28.2.2009 6.25%
1.3.2009 5.4.2010 4.75%
6.4.2010 5.4.2014 4.00%
6.4.2014 5.4.2015 3.25%
6.4.2015   3.00%

In January 2000 the Inland Revenue announced that the general approach would be to set the official rate in advance for the whole of the following tax year, in order to lower the regulatory burden on employers. This policy is reviewed if during a tax year interest rates fall significantly, to ensure that employees are not overtaxed on this benefit.

For example, in the autumn of 2001 there were successive reductions in interest rates and, rather than waiting until 6 April 2002, with effect from 6 January 2002 the official rate was reduced to 5.00%. The average official rate for 2001/02 was 5.94%.

The official rate remained unchanged at 5.00% from January 2002 to April 2007. On 6 April 2007 the official rate was increased to 6.25%.

There was a further in-year change in the official rate in 2008-09. Following successive reductions in interest rates in late 2008 and early 2009, the official rate was reduced to 4.75% from 1 March 2009. The average official rate for 2008/09 was 6.1%.

The official rate remained unchanged at 4.75% throughout 2009/10 and was reduced to 4.00% with effect from 6 April 2010.

The rate remained unchanged until 6 April 2014 when it was reduced to 3.25% and then 3.00% on 6 April 2015.

See EIM26105 for certain foreign currency loans.