HMRC have announced that the official rate of interest applying to interest-free or low interest employment related loans will change from 6.25% to 4.75% from 1 March 2009.

The official rate is varied from time to time under Treasury regulations. The general approach is to set the official rate in advance for the whole of the following tax year, in order to lower the regulatory burden on employers. This policy is reviewed if during a tax year interest rates fall significantly, to ensure that employees are not overtaxed on this benefit. Accordingly, the official rate is set to change from 1 March to take account of the changes in the interest rates.

Full details are available at http://www.hmrc.gov.uk/employers/ebik/ebik3/beneficial-loans-04.htm