With the Bank of England base rate steadily increasing over the last year to 4.25%, employees and directors in receipt of loans from their companies may have been expecting a similar hike in the interest rate payable on them. They may however be in for an unexpected benefit.

When an employee or director receives a loan from their employer, this can represent a taxable benefit if it is considered a cheap or interest-free loan. Cheap for this purpose means that the interest rate charged by the employer on the loan is below the official rate of interest set by government.