HMRC have announced the official Rate of Interest from 06 April 2025.
The Official Rate of Interest (ORI) is used in two circumstances:
Beneficial Loans to Employees
A loan to an employee is classed as beneficial (and, therefore, subject to a benefit-in-kind calculation) if:
- The average loan value to the employee was £10,000 or more in the tax year; and
- The interest charged on the loan is less than the ORI
Accommodation
If accommodation is provided to an employee by reason of employment, the ORI is used to determine the taxable benefit in cases where the value of the property exceeds £75,000.
The Taxes (Interest Rate) (Amendment) Regulations 2025 increase the ORI from 2.25% in 2024/25 to 3.75% with effect from 06 April 2025.
For Bookkeepers
So, the increase in the ORI will affect the above benefit-in-kind calculations from tax year 2025/26. Further, and importantly, the UK Government announced at Autumn Budget 2024 that the ORI will be subject to a quarterly review from 06 April 2025. Therefore, the rate of interest will no longer apply for a full tax year and may increase or decrease, as appropriate, following each quarterly review.
Whilst this does ensure that employment-related beneficial loans and living accommodation are correctly valued, the move away from an annual ORI does make it more complicated to calculate the taxable amount if the value is payrolled.
ICB’s advice, therefore, is to think carefully about moving to voluntarily payroll both employment-related beneficial loans and living accommodation, as there are, currently, no plans to mandate payrolling of these from 2026.
