The official rate of interest will fall from 2.5% to 2.25% from 6 April 2020 as provided for in The Taxes (Interest Rate) (Amendment) Regulations 2020, SI 194/2020.
The official rate of interest is used to calculate the tax charge on beneficial loans and the taxable benefit of some employer-provided living accommodation.
If an employer makes a loan to an employee at an interest rate less than the official rate, the employee is charged to tax on an amount based on the official rate less any interest paid. Some loans are exempt (broadly, those qualifying for tax relief), and there is no charge if the total of all non-qualifying loans to the employee does not exceed £10,000 at any time in the tax year.
Where an employee is provided with taxable living accommodation, there is an additional benefit-in-kind charge if the accommodation costs over £75,000. This is calculated as the ‘appropriate percentage’ of the cost of providing the accommodation over £75,000 less any costs paid by the employee. The appropriate percentage is the official rate of interest at the beginning of the relevant year of assessment.