It has been announced that HMRC's official rate of interest will rise from 2.25% to 3.75% per annum with effect from 6 April 2025.
The official rate of interest is used to calculate the taxable deemed interest on beneficial loans from an employer to an employee, where (subject to the availability of certain reliefs) the amount outstanding under all such arrangements exceeds £10,000 at any point during the tax year. In the context of employee share ownership, this can be relevant to companies who offer their employees the opportunity to fund the purchase of shares by way of deductions from salary (other than via an HMRC tax-advantaged Share Incentive Plan) or from the proceeds of a subsequent sale of those shares.
This follows the announcement in the Autumn Budget 2024 that the official rate of interest may also now change in-year. Current and historic official rates of interest are available at EIM26104.
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