Loans provided to employees

Produced by a Tolley Employment Tax expert
Employment Tax
Guidance

Loans provided to employees

Produced by a Tolley Employment Tax expert
Employment Tax
Guidance
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Employers sometimes provide their employees with loans, sometimes charging interest and often not, either as part of the reward package or to help the individual meet significant expenditure. For example, it is common to provide loans for the purchase of annual travel passes.

As with any other kind of employment reward, if the loan is provided by a third party rather than the employer, it is worth considering whether the disguised remuneration provisions apply, as those rules have priority over most of the other rules for taxing employment income. The rules are discussed in detail in the Disguised remuneration ― overview guidance note.

When an employer lends money to an employee at an interest rate lower than the official rate of interest (ORI) set by HMRC, the difference between the amount of interest actually charged (if any) and the ORI is a taxable benefit.

To be a benefit, the loan must be provided ‘by reason of employment’. A benefit provided to an employee’s relative is chargeable on the employee (unless that relative is also an employee,

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  • 18 Mar 2025 12:51

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