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Loan from employer

thelinds
thelinds Posts: 5 Forumite
in Loans
Hi all

In the process of buying a house - my employer has offered to give a £20k loan (interest free)....

Question is, would there be any tax implications on this? If so, what would they be?

Thanks for any help....
«1

Comments

  • [Deleted User]
    [Deleted User] Posts: 35,242 Forumite
    Part of the Furniture 10,000 Posts Photogenic Name Dropper
    Are you hoping to get a mortgage? Is this forming the deposit?
  • PeacefulWaters
    PeacefulWaters Posts: 8,495 Forumite
    Yes. It will be taxed as a benefit in kind.

    I believe the official HMRC rate is 3.25%, implying a value of £650 which will be the amount taxed at your highest rate.
  • thelinds
    thelinds Posts: 5 Forumite
    Yes this would be part of my deposit (some from myself, and the rest from this loan), so will have a mortgage as well
  • [Deleted User]
    [Deleted User] Posts: 35,242 Forumite
    Part of the Furniture 10,000 Posts Photogenic Name Dropper
    Have you managed to identify a lender who will accept a borrowed deposit? They're a fairly rare breed.
  • Arleen
    Arleen Posts: 1,164 Forumite
    1,000 Posts Combo Breaker
    I don't think it's very wise to use the loan as a deposit because what you are in fact doing is borrowing money to borrow more money from the bank. As I understand they are likely to ask about its source.
  • thelinds
    thelinds Posts: 5 Forumite
    Ok so, I would be taxed on £650 only? So if salary is 20k (for example), I would be taxed on 20650? Sorry....tax is a minefield for me....
  • thelinds
    thelinds Posts: 5 Forumite
    The loan would be taken from bonuses, not from basic salary
  • Gaz83
    Gaz83 Posts: 4,047 Forumite
    1,000 Posts Combo Breaker
    You'll struggle to find any lender who will accept a borrowed deposit.
    "Facism arrives as your friend. It will restore your honour, make you feel proud, protect your house, give you a job, clean up the neighbourhood, remind you of how great you once were, clear out the venal and the corrupt, remove anything you feel is unlike you... [it] doesn't walk in saying, "our programme means militias, mass imprisonments, transportations, war and persecution."
  • PeacefulWaters
    PeacefulWaters Posts: 8,495 Forumite
    thelinds wrote: »
    Ok so, I would be taxed on £650 only? So if salary is 20k (for example), I would be taxed on 20650? Sorry....tax is a minefield for me....
    Correct.

    It's an annual benefit and will reduce as the debt reduces.

    But I still think you're going to struggle to use this money as a deposit.
  • mrmagooooooo
    mrmagooooooo Posts: 95 Forumite
    I have to agree with other comments here. Your solicitor will ask you for proof of where your deposit came from. They have to do this to abide by money laundering legislation. They will then pass this info on to your lender of which (if you have told them fibs) would probably cancel your mortgage offer. Loans for a house deposit are a big no no to Mortgage lenders :(
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