Official interest rate

The Inland Revenue maintains an official rate of interest that is used in the calculation of some benefits-in-kind, in particular, the reportable value of beneficial or subsidised loans, and the additional charge on the provision of some living accommodation. The rate that has applied throughout the 2003/04 tax year, i.e. 5%, has been confirmed as applying also for 2004/05.

The rate is fixed for the whole year unless there are significant changes to market mortgage rates.
Source: http://www.gnn.gov.uk/gnn/national.nsf/...
...back to 16 January 2004

Revenue official interest rate

The official rate of interest used in the calculation of the reportable value of beneficial loans and some living accommodation is reduced from 6.25% to 5% from 6 January 2002.

At the beginning of 2000, a Revenue press release announced that, where possible, a single rate of interest would be maintained for the whole of a tax year. As the reportable value of a beneficial loan is based on the official interest rates in force throughout a year, it is easier to calculate the value if it is fixed in advance of each tax year. The rate was 6.25% for all of the 2000/01 tax year and, in February 2001, employers were advised that the same rate would be used for 2001/02.

However, in the January 2000 press release, the Revenue did allow for the rate to be reduced mid-year where there were significant reductions in general mortgage interest rates. As rates have fallen during 2001, the Revenue has decided to mirror the reductions immediately, rather than wait until the start of the coming tax year.

The implications of this announcement are:

• The average official interest rate for beneficial loans with balances outstanding for the whole of 2001/02 will be 5.94% (i.e. 275 days
@ 6.25% and 90 days @ 5%).
• For loans with balances available for only part of the tax year, the average rate will be based on the number of days the loan was
available at each of the rates. Help with calculating the average rate will be given on form P11D(INT), to be published by the Revenue
in March 2002.
• The official interest rate to be used for calculating the "additional charge" in respect of some living accommodation will be 6.25%, as
this charge uses the rate in force at the start of the tax year.
• The official interest rate for the 2002/03 will be 5% for the whole of the year, unless there are further significant falls in general
mortgage rates.
Payroll Briefing 215 - 3 January 2002

Interest Rates

On the annual P11D(INT) notice, the Revenue has confirmed the 2000/01 official interest rate as 6.25% for the calculation of beneficial loans and the provision of some living accommodation, and declared the 2000/01 interest rates for loans in Japanese Yen and Swiss Francs as 3.9% and 5.5% respectively.

The interest rate charged by the Revenue on late payments of income tax and NICs has gone down from 8.5% to 7.5% from 6 May 2001. The rate at which the Revenue will pay interest on overpayments of tax and NICs has also reduced from 4% to 3.5%. - Payroll Briefing 201 - 9 May 2001