Loans and national insurance

  • A loan itself is not remuneration for National Insurance purposes. Consequently no Class 1 contributions are due on the granting of a loan, or on the cash equivalent of a low interest or interest free loan.
  • Class 1a contributions may become due if the loan is waived, written off, or if the employee/director does not pay interest on the loan at an amount equivalent to the “official rate”.
  • An advance of pay is treated as a loan – any tax or National Insurance becomes deductible when the normal pay date arises.
  • Loans provided to employees who are unable to work due to injury or accident will be subject to a National Insurance charge unless the loan is repayable whatever the outcome of the employee’s claim for damages.
  • These rules apply to directors and other employees.

Respond to this post