Beneficial Loan Tax - Rules When Leaving Employment

Topcat105uk

I have a personal fixed rate loan taken out with a bank when I was an employee. I was given a preferential interest rate and therefore paid tax on this benefit in kind.

I have now left this bank's employment, but the loan still exists as the term extends for another 3 years. The loan interest rate can not be changed as it is fixed at the time it was taken out.

My question is, do I still have to pay tax on this loan now that I have left the bank? I have been told by the tax office when querying my tax code, that I was having tax deducted for over a year after my employment finished.

I have tried to find the answer online but have drawn a blank on the government websites.

Any help would be greatly appreciated!

Regards
Tom

agrinnall

I also couldn't find anything about what happens when a loan continues after employment has ended - the most comprehensive information I located is here but I couldn't see this situation mentioned.

Hopefully one of the current or ex-HMRC posters will know the answer. My own feeling is that if it was deemed a beneficial loan at the time you were employed then it's probably right that it continues to be one until the end of the loan term, regardless of employment status - but I could easily be completely wrong.

xylophone

This was a rate available solely to employees?

If so, was there nothing in the terms of the original loan agreement to cover what would happen if you left-(perhaps something on the lines of your having to refinance with another lender)?

Otherwise, if you have no connection with the bank as an employee or current pensioner, this is no longer a loan provided at a beneficial rate to an employee?

In your situation I would first check the original loan agreement and if no joy, would write to HMRC querying tax treatment.

Topcat105uk

Thanks for the replies.

The loan was the same product as offered to the general public, just at a slightly lower rate for staff so nothing in the small print about having to pay it off if or when you left the company.

Being a fixed rate at application, there is no way the bank can change the rate as you are signing up to an amount borrowed and a set charge for borrowing that amount at the beginning of the loan.

Might see if I can get hold of an ex-colleague and see if there is anything in terms and conditions with HR.

Thanks again for all your help.

Tom