The official rate of interest on an employment related loan is to remain at 4% with effect from 6 April 2012. A change in the rate is only made in the event of significant changes in interest rates.

The interest rate is used to calculate the benefit in kind charge that arises when directors or employees, earning more than £8,500 per year, are provided with an interest free or low interest loan by reason of their employment.

The benefit in kind charge will apply when a loan is provided at an interest rate of less than 4%. In addition employers must also pay Class 1A national insurance premiums.