HMRC has confirmed that both the average and actual official rate of interest for the 2025/26 tax year will be 3.25%, affecting the calculation of certain employee benefits.
The Official Rate of Interest (ORI) is used to calculate the taxable value of certain employee benefits. Most commonly, it applies in two situations: beneficial loans to employees and employer-provided accommodation.
For beneficial loans, the ORI is relevant where the average loan balance to an employee is £10,000 or more during the tax year and the interest charged is below the official rate. The ORI is also used when calculating the benefit in kind for employer-provided accommodation where the property value exceeds £75,000.
Under the Taxes (Interest Rate) (Amendment) Regulations 2025, the ORI increased from 2.25% in 2024/25 to 3.75% from 6 April 2025 onwards. However, employers can calculate the benefit using either an average rate for the tax year or the actual rate for specific periods.
The average rate reflects the position across the full tax year and is generally used for year-end calculations. The actual rate can vary during the year and may be used if employers calculate the benefit quarterly.
On 6 March 2026, HMRC confirmed that both the average and actual ORI for the 2025/26 tax year will be 3.25%.
For bookkeepers, it is worth noting that although the ORI applies to more than one type of benefit, HMRC publishes it in a single document titled Beneficial loan arrangements — HMRC official rates.
Members should also consider the potential impact on clients who plan to payroll beneficial loan or accommodation benefits from the 2026/27 tax year. The timing of rate announcements, combined with the possibility of quarterly changes, can make these benefit calculations more complex.
