This is a freeview 'At a glance' guide to employment-related loans. 

An employer may make a tax-free loan to an employee for a sum of up to £10,000.

  • The limit was £5,000 per year for years up to 2013-14.
  • Where an interest-free, or low interest, loan is made in excess of the tax-exempt amount a taxable benefit will arise.
  • The loan benefit is calculated by taking the outstanding loan balance multiplied by the Official rate of interest.
  • The beneficial loan interest can be calculated in different ways; an average method may be used, see HMRC employment income manual.
  • Employers need to take some care if there are different loans or loans replacing loans, or if there are loan write-offs as these are generally taxable as earnings and so PAYE reporting becomes an issue.

Loans to directors and participators

A s.455 CTA 2010 tax charge will arise when loans made to participators (persons with a financial interest in the company) are outstanding more than nine months after the end of the company's accounting period, see Directors' Loan Account Toolkit.

Our Close company loans toolkit (loans to participators) takes a detailed look at the Corporation Tax treatment when a Close Company makes a loan to a participator (shareholder). It also provides links to our guides for individuals on the making of loans to companies.


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