Long Service advance ie 8.5K to help buy a house Beaware

Trying_to_be_good

The amount of loan outstanding should be on your annual P11D (like a P60, but has the details of other benefits from your employer, not pay). This is used to calculate the taxable benefit of the 'beneficial' loan (because it's at lower than commercial interest rates). It's still MUCH cheaper than borrowing the money from elsewhere - tax at 20% on £720 is £144, or £12 per month.

The £720 is calculated as the amount of outstanding loan multiplied by the difference between the official rate of interest and interest, if any, paid (no interest in this case). The official rate is 6.25% at the moment. Rates are detailed here: http://www.hmrc.gov.uk/rates/interest-beneficial.htm. I hope it will be tumbling to take account of base rate reductions.

Remember you pay tax on the £720, you don't pay the actual £720. So you're paying the equivalent of 6.25% times 20% tax (for basic rate), i.e. 1.25%. Not sure if there's National Insurance on it, too.

Sparky29

frugal_matelot wrote: »

For info I took LSAP 12 years ago. The truth is it is only classed as a beneficial loan by the HMRC until you owe less than £5000. After this time all you pay is the insurance which is a couple of pounds a month. I know this because I queried why my tax code was different to a friends in exactly the same situation as me. His was higher than mine. When I contacted the HMRC they changed my tax code back to normal because by then I only owed a couple of thousand. I also got £450 back by rebate. Apparently its the MOD's responsibilty to inform the HMRC when it gets below the £5000 threshold but in my case they didn't. Hope this helps.

Check out this topic on the HMRC website:
http://www.hmrc.gov.uk/employers/ebik/ebik3/beneficial-loans-08.htm

This is true. My mate tried to get the full amount but was advised by the RAO that he would be financially better off just getting £4999

strong96

my hubbies tax code is 533l, never signed for any of his bonuses, i'm an accountant and still cant figure that one out.

jules0971

Just checking out my hubbys pay slips...we are now in the position this month where we owe £4870 so under the 5k level...from what Ive read here I think you mean that there would/should be a change in tax code at the point where you changed from >5k to <5K owed.....it looks like 'we' have changed from 491L down to 551L on the payslips where we go under 5k. Does this seem about right?

Cat695

jules0971 wrote: »

Just checking out my hubbys pay slips...we are now in the position this month where we owe £4870 so under the 5k level...from what Ive read here I think you mean that there would/should be a change in tax code at the point where you changed from >5k to <5K owed.....it looks like 'we' have changed from 491L down to 551L on the payslips where we go under 5k. Does this seem about right?

well your still paying more than usual tax (i'm guessing he earns less than 40k) as your "normal" tax code should be 603L (6k tax)

jules0971

Hmmm will get him to check his tax code with PSF or whatever theyre called next week....ta.