On Mar. 6, UK Treasury amended the interest rate regulations.
UK Treasury published the Taxes (interest rate) (amendment) regulations 2025 (StIn 2025/270) which were laid before the House of Commons on Mar. 6, 2025.
Interest Rate
Directors/employees are liable to tax on benefits in kind they receive by employment.
Where an interest-free or low interest employment-related loan is made, the taxable benefit is the difference between any interest paid by the employee and the interest which would have been paid at the official rate of interest (where that is greater).
Where tax charge arises, employers pay Class 1A NI contributions on taxable benefit.
Official rate of interest is also used to determine taxable benefit of employer-provided living accommodation, in cases where the value of the property exceeds £75,000.
UK HMRC confirms the official rate of interest in advance of the new tax year to help simplify record keeping and benefit valuation for employers.
Latest review of average rates on mortgages showed the rate should be increased.
Employers should use the increased official rate of interest of 3.75% for 2025-26 to calculate the value of the relevant taxable benefits they provide to their employees.
