Loans to employees

Written by AJN Accountants
26 October 2022

Many employers will advance modest loans to employees to meet upfront costs which they necessarily incur to enable them to work, such as a travel season ticket or a deposit for childcare costs. Such loans can also be provided to help towards other unexpected costs such as a car repair or gas bill.

The loan needs to be properly documented with clear repayment terms but there is no obligation on the employer to charge interest on the outstanding capital.

Where the total value of loans made by the employer to the employee does not exceed £10,000 in the tax year there is no benefit in kind to declare. A larger total will have to be declared on the annual form P11D for the employee and the benefit is calculated as the interest that the employee should have paid at the official rate (currently 2.5%).

If the loan is advanced to individuals connected with the company (eg directors or shareholders) it must be declared on the company’s tax return. The company must pay tax on any loan balance outstanding more than nine months after the end of the accounting period in which the loan was provided.

We can help you calculate any tax charges connected with loans provided to employees or directors.

Why Understanding Your Cost Structure Is Key to Sustainable Business Growth

When planning for growth, most business owners focus on sales, marketing, and operations. But one of the most overlooked — and critical — elements of scaling successfully is understanding your cost structure, particularly the split between fixed and variable costs....

Why Setting Up a Company and Moving to the UAE Isn’t Always Enough to Make You Non-Resident in the UK

The UAE has long been an attractive destination for entrepreneurs and professionals seeking a tax-efficient lifestyle. With 0% personal income tax, a fast-growing economy, and a strategic hub connecting Europe, Asia, and Africa, it’s no surprise that many UK business...

Financial Success for Healthcare Professionals

For doctors and other health professionals, navigating the ever-changing world of financial planning can be complex and demanding. From the early days of your career to retirement, understanding the unique financial challenges and opportunities you face is essential...

Related Posts

Companies spared from Making Tax Digital

Companies spared from Making Tax Digital

HMRC has confirmed that companies will not have to comply with the requirements of Making Tax Digital (MTD) for corporation tax (CT) purposes  No start date had been set for MTD for CT, under which companies would have been required to maintain digital records; send...

Back to Basics: Life Insurance Policies and Tax Treatment

Back to Basics: Life Insurance Policies and Tax Treatment

Life insurance arranged by employers can provide vital financial protection for employees, their families, and the business itself, with important tax rules to consider. Employers often take out life insurance cover to protect against the financial impact of losing an...

We use contact information you provide to us to contact you about our relevant content, products, and services. You may unsubscribe from these communications at any time. For information, check out our Privacy Policy.