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There are two methods available for calculating a client’s taxable loan
benefit amount, the average method which can be done via the loan details
option or the precise method which is done using the loan benefit calculator.
Both methods are equally correct, the precise method is normally used
if the maximum amount of the loan outstanding during the tax year is higher
than the amount outstanding at the start and end of the tax year.
Click the links below to jump to a particular section:
Log on to the P11D module, select the Employer and click on the relevant Employee.
From the Edit menu select Employment benefits.
Click New and select benefit type 1 or 2.
Click Loan Detail.
Enter the loan details.
The maximum amount outstanding section is for informational purposes only and that the total interest paid by borrower will not be included in the calculate if benefit type 1 (interest free loans) has been selected.
The client has an interest free loan, entered using benefit type 1 the details are as follows:
The benefit of £30 has been calculated as follows:
(Amount outstanding at the start of the year + amount outstanding at the end of the year) / 2 the result is the multiplied by the average official rate of interest for 2017 this is 4%.
(1000+1000)/2 *4%= £30
For low interest loans- entered using benefit type 2 the benefit is calculated in the same way as above then total interest paid by the borrower is deducted to arrive at the taxable benefit amount. The amount will be apportioned if the loan is not available all year. When using this average method; ensure that the default Use calculated value remains selected.
This is achieved by using the loan benefit calculator which can be accessed as follows:
Log on to the P11D module, select the Employer and click on the relevant Employee.
Select Loan
Benefit Calculator from the menu bar.
The loan outstanding at 6.4.16 was £10,000, the client paid off £3,000 on 31.12.16 interest rate through the tax year is 3%. This is entered into the loan benefit calculator as follows:
Enter £10,000 into Loan outstanding.
Enter 31/12/16 on to Date 'to' rate of interest was applied.
Click Add loan benefit then click the forward arrow to continue.
Enter £7,000 into the Loan outstanding.
Enter 5/4/17 into Date 'to' rate of interest was applied.
Click Add
loan benefit.
Click Close.
The £276.58 has been calculated as follows:
10,000 *3% = £300 this amount is then apportioned as the period was 270 days= £221.31
7000 *3%= £210
this amount is apportioned as the period was 96 days = £55.08
Total loan benefit = £276.39, this amount must then be entered into the employment benefit section. The loan details section must still be completed, in order to use the amount calculated using the benefit calculator, enable the use benefit value as entered then enter the benefit value.