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HMRC internal manual

Employment Income Manual

The benefits code: beneficial loans: exemptions from charge: small loans

Section 180(1)(a) ITEPA 2003

No tax is chargeable if the total balance outstanding on all beneficial loans does not exceed £10,000 throughout the year of assessment in question (£5,000 for 2013/14 and earlier tax years).

This means that, in strictness, where this exemption may be in point, it will be necessary to calculate and consider the total balance outstanding on all an individual’s beneficial loans on a day-to-day basis. However, in practice, many loans will decrease steadily from the time when they are taken out. As regards such loans, the maximum balance in any year cannot exceed the balance at the beginning of that year (or, in the case of a loan taken out in the year, at the time when it was taken out). So it will be possible in such cases to know whether the exemption applies without knowing the maximum total balance outstanding day-by-day. If you are satisfied that a lender operates a system that identifies loans that exceed the £5,000 limit you should accept arrangements based on that system.

Note in this connection that interest accrued is not added to the balance of a loan outstanding until the interest falls due for payment.

See EIM26142 for an example of the £10,000 exemption applying.

See EIM26145 where the total balance on all loans exceeds £10,000, but the total balance on non- qualifying loans (see EIM26137) does not.