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BIK Loan

M635
M635 Posts: 63 Forumite
in Cutting tax
Hi,

Sorry if this is the wrong board.

I'm looking at taking a loan from my employer for £7000 at a preferential interest rate, my question is do I pay BIK on the whole 7k or just the 2k which is above the 5k tax free value.

I've looked online and cannot find the answer or a calculator to work this out.

Thanks

Comments

  • nomunnofun
    nomunnofun Posts: 841 Forumite
    It is on the whole loan but is averaged out. Here is the official calculation form.

    http://www.hmrc.gov.uk/ebu/p11dws4.pdf
  • SuperHan
    SuperHan Posts: 2,269 Forumite
    Part of the Furniture 1,000 Posts
    What is the preferential interest rate?

    You basically calculate what the interest would be if you had taken at a market rate (currently 4%), and deduct the interest you are actually paying to get the benefit in kind amount.
  • taxguru
    taxguru Posts: 5 Forumite
    Budget 2013 has raised the threshold for employee loan from £5000 to £10,000 from 06 April 2014. So a preferential interest rate on a £7k loan will not lead to a BIK charge from that date.
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