Following the government’s announcement earlier n March 2025, the Official Rate of Interest (ORI) will increase from 2.25% to 3.75% on 6 April 2025.
The ORI is used to calculate the Income Tax charge on the benefit of employment-related loans (beneficial loans over £10,000) and the taxable benefit of some employment related living accommodation.
NB: The £10,000 figure is the combined oustanding value of loans through the year.
The government announced in the autumn statement that the rate would be reviewed quarterly from April 2025, rather than annually. If there are any changes to the rate, these will take effect on 6 April, 6 July, 6 October and 6 January.
Any future changes to the official rate will be published on GOV.UK.
Further information on the Autumn Budget 2024 Overview of tax legislation and rates is available.
If you provide employment related loans or living accommodation to your employees, you will need to know the correct ORI to apply when you calculate the value of any benefit for 2025 to 2026. Additionally, the new rate means employees might have to pay tax on employment related loans or living accommodation where they may not have previously.
You will also need to remain aware of any future changes in the rate during the tax year. As of 6 April 2025, the rate may increase in-year which will impact the taxable value of the benefits.