This guide outlines the key reporting, tax and National Insurance contributions (NICs) requirements if you provide a beneficial loan to an employee or one of their relatives. It also explains what to do if you write off a loan that you've made to an employee.
To go direct to more detailed information - eg, covering aggregated loans and the difference between qualifying and non-qualifying loans - choose the link below to 'Technical guidance'.
On this page:
The rules in this section cover interest-free loans or loans with an interest rate below HM Revenue & Customs (HMRC) official rate of interest that are provided to your employee - or their relative - by any of the following:
The rules also apply if you or any of the others in the list above arrange, facilitate, or guarantee a loan, or take one over from someone else.
Note that there are other more complicated situations in which cheap or interest-free loans are covered by the rules. For more details, use the links in the 'Technical guidance' section at the end of this guide.
For employees earning at a rate of less than £8,500 per year:
For company directors or employees earning at a rate of £8,500 or more per year (unless the exceptions below apply):
Follow the link below to find out how to work out the value to use on form P11D.
Beneficial loans – work out the value to use
For company directors or employees earning at a rate of £8,500 or more per year there are no reporting requirements and no Class 1A NICs to pay if any of the following applies:
EIM26134: Contrasting treatment where some or part of the interest would qualify for relief
Covers any loan to an employee that you write off. For these rules to apply, the loan doesn't have to be a 'beneficial loan' of the kind described in the previous section.
For employees earning at a rate of less than £8,500 per year:
For company directors or employees earning at a rate of £8,500 or more per year:
The value to use is the full amount that you write off.
It's important to choose correctly between forms P11D and P9D for each employee. The form to use depends on the whether the employee is a director of your company and on whether their earnings are above or below an annual rate of £8,500. For more information - including details of what's included in the £8,500 threshold - follow the link below.
EIM26100: Beneficial loans – contents page
NIM02210: Class 1 NICs – loans written off
EIM26116: Loans released or written off
Download 'Expenses and benefits: a tax guide' (480) – see chapter 17 (PDF 381K)
