What is a beneficial
It is a loan at a concessionary rate of interest that is also
connected with your employment. This includes a car loan. It is
regarded as a benefit in kind, and you may be taxed on the value of
How is the value of this benefit
It is the difference (if any) between the interest you have
actually paid, during the tax year, and the interest you would have
paid if the loan had been granted at HM Revenue & Customs'
Official Rate. This is called the "cash
What is the Official Rate?
This is a figure, prescribed each year by the Government, to
reflect typical mortgage rates.
Is tax always charged on this benefit?
No. As long as the outstanding capital balance on your loan never
exceeds £5,000 during the tax year, no tax will be charged for that
Can you give me an example of an actual tax
Suppose a loan of £8,020 at 5% p.a. over 4 years were granted
in April. Since this exceeds £5,000, it is taxable. The actual
interest paid during the year would be £358.83.
If the Official Rate had been 6.25%, interest charged at this rate
would have amounted to £444.32. The cash equivalent would therefore
be £85.49. Tax at 22% would then amount to £18.80.
Can I obtain any tax relief
on the loan because I use my car for work purposes?
No. The Government withdrew this relief with effect from April
Is National Insurance payable on the value of the
Not by you. However, the Church Commissioners, as provider of the
benefit, have to pay the employer's national insurance on it.