Bringing employee loans into the 21st century

Michael Deeks, Tax Partner, Olswang

The most common response to today’s announcements regarding the increase in the current statutory threshold in relation to cheap employer loans from £5,000 to £10,000 must surely be – finally!

The legislation currently provides that employers may make cheap loans to employees (i.e. loans without interest or where interest is due at less than the prevailing rate of interest published by HMRC from time to time) of up to £5,000 without triggering a benefit in kind tax charge for the employee.  When this limit was set (25 years ago) it was a much more meaningful amount.  Given the cost of living increases in recent years we have heard of cases where employees’ season ticket loans have resulted in benefit in kind charges arising.  At last this issue has been considered and the revised threshold of £10,000, which will be effective from 6 April 2014, will be welcomed by employees and employers alike.

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