Bonus rates for the Save As You Earn (SAYE) Sharesave scheme, administered by HMRC, have been reduced as a result of the cut in interest rates.The FT notes that:
"On a three-year contract, the bonus rate is now 1.5 times the value of an employee's monthly payments, down from 2.4 times. This lowers the effective interest rate to 2.67%, down from 4.23%".
When will the rate charged by HMRC on overdue tax be cut in line with interest rates?
Tax does have to be taxing.
HMRC Is Shite (www.hmrcisshite.com), also available via the domain www.hmrconline.com, is brought to you by www.kenfrost.com "The Living Brand"
Erm. It was on December 6th. On November 6th, too!
ReplyDeletehttp://www.hmrc.gov.uk/rates/interest-late.htm
Anyway, the SAYE cash bonus is paid by the employer (well, a bank on the employer's behalf, usually!), not the Treasury!
I said "administered", and did not mean to imply HMRC gave the bonus themselves:)
ReplyDeleteGlad we got that straight. Wouldn't want your readers to get the wrong idea!
ReplyDeleteAre you sure you've never had a career in tabloid journalism? :-)
No, my boobs aren't big enough:)
ReplyDeleteI also note that despite the significant reductions in interest rates that HMRC have made no changes to the "official rate" for beneficial loan arrangements. Major interest rate cuts are now costing me an extra £200 per month in income tax, nice one guys!
ReplyDeleteThe official rate for beneficial loans has nothing to do with the Bank of England base rate. It's meant to be an approximation of the rate you'd pay if you were to borrow the money from a High Street bank (i.e. because it represents the benefit of an interest-free loan vs taking out a similar loan from the bank).
ReplyDeleteThe official rate is 6.25%. Because banks are still highlt reluctant to lend to each other, their rates are much higher than the BoE base. If you can find a bank that will give you an unsecured loan at as low a rate as that at the moment you're doing well. (I just searched on moneysupermarket.com for a 3 year £10000 loan and the best was 7.8%!)
This is all well and good but the HMRC official rate also applies to mortgages as well as unsecured credit. In this are there have been some significant cost reductions, certainly below 6.25%
ReplyDeleteAnon at 0646,
ReplyDeleteI disagree for the following reasons:
1) The official rate doesn't really "apply to" mortgages or unsecured loans. At the end of the day it's intended to stop people getting a tax advantage through employees being rewarded via loans rather than (taxable) pay. (The wheeze used to be that you made a loan to the employee that somehow never got repaid!)
2) Having said that, I would argue that an unsecured rate is more applicable than a mortgage rate, as it's highly unlikely that an employer would require security when granting a loan to an employee.
This is likely to be particularly the case where the owner of a close company borrows from the company (the situation in which most of the avoidance took plave that the beneficial loans legislation was supposed to catch), as you'd be mad to grant security to your own small business unless you had to (if the bank required you to, for example). If the company went under you'd lose your house!
3) Actually, 6.25% still isn't that bad for a mortgage right now! Although some of the headline rates are lower, once you take into account the booking fees, etc. you have to pay to get the mortgage, while it's not market-leading (and see my point 1 above - the whole point is to stop people effectively getting free loans from the taxpayer), it's still pretty competitive!
Totally disagree with the beneficial loan rate comments. apparently it has come down today and rightly so. Its does affect people with mortgages from their employers and the 6.25% rate has been way above SVR's that have been available.
ReplyDeleteI have a, "Beneficial Loan Arrangement" with my employer from 5 years back which assisted me to re-locate with my job or be saddled with redundancy. I and my employer, (Civil Service) have benefited from this in terms of expense of training new personnel and a redundancy payout. My mortgage currently is less than 1% interest why is HMRC charging me 4%? Maybe I should pay my bank a little bit more and bin the government rip off loan.
ReplyDeleteI work for them and they have benefited as well and still they fleece you!