What is Beneficial Loan? UK Definition 2026/27
Quick Answer
A loan from your employer at below-market interest rate, creating a taxable benefit.
Definition of Beneficial Loan
A beneficial loan is a loan from your employer at no interest or below the official rate (currently 2.25%). The benefit is taxed on the difference between interest paid and the official rate. Loans under £10,000 at any time in the tax year are exempt from this benefit-in-kind charge.
Beneficial Loan — Key Facts for 2026/27
| Official rate 2026/27 | 2.25% |
| Exempt threshold | £10,000 at any time |
| Taxable benefit | Interest shortfall |
| Reported on | P11D |
How Beneficial Loan Works — Example
- 1Loan from employer: £20,000
- 2Interest paid: 0%
- 3Official rate: 2.25%
- 4Benefit: £20,000 x 2.25% = £450
- 5Tax at 40%: £180 per year
How Beneficial Loan Affects Your Tax
Interest-free loans under £10,000 are a tax-free benefit. Above this, the tax cost is relatively modest. Compare against commercial loan costs to assess the true benefit.
Official HMRC Guidance on Beneficial Loan
For official guidance, refer to HMRC's documentation. Tax rules can change, so always verify current rates and thresholds on gov.uk.
HMRC: Beneficial loansFrequently Asked Questions about Beneficial Loan
Related Tax Terms
Accuracy Note
This information is for guidance only and is based on 2026/27 tax year rates. Tax rules are complex and your circumstances may differ. For personal advice, consult a qualified accountant or tax adviser.