16/04/2024
HMRC’s Official Rate of Loan Interest
HMRC have recently announced that the official rate of interest from April 2024 will remain at 2.25%. This rate is likely to be in place for the whole of the 2024/25 tax year.
The official rate of interest is used to calculate the benefit in kind charge that is due on inexpensive loans (which exceed £10,000) along with the benefit in kind charge that applies to certain employee living accommodation benefits.
Directors/shareholders may well think that they may wish to take advantage of this relatively low interest rate by taking loans out of their company. This though will create a s455 charge for the company which is charged at 33.75% on the outstanding loan value. This charge can be repaid but only 9 months following the accounting period in which the loan is repaid.
The rate of interest HMRC charge on the late payment of tax is not the same as above. For the late payment of income tax and corporation tax the current rate of interest applied is set at 7.75%, which is significantly higher than the ‘official rate of loan interest.’
Should you have any questions concerning the above, please call 023 8046 1237 or email Joe Wilson.
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