Budget 2013: The threshold for tax exemption on employment-related ‘taxable cheap’, low-cost or interest-free loans, such as travel season ticket loans, will double.
Chancellor George Osbourne revealed in his 2013 Budget speech that the current threshold of £5,000 will increase to £10,000 for the 2014-15 tax year. As long as the total outstanding balances on these loans do not exceed the threshold at any time in a tax year, there will be no tax charge.
Legislation will be introduced in the Finance Bill 2014, before the change comes into effect from 6 April 2014.
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Following the change, employers will no longer be required to report details of small loans where the outstanding balance is £10,000 or less throughout a tax year.
The government expects 7,000 employers will benefit from the measure and that the financial result from the reduction in administrative duties will total £600,000 per year.
Mark Groom, tax partner at Deloitte, said: “This simple change will make a big difference to many employees. For example, many employers provide employees with low or interest-free loans to enable them to buy transport season tickets.
“With the cost of commuting increasing, the loans required are starting to exceed the existing tax-free limit. Doubling this to £10,000 will help employees get to work without the additional burden of a taxable benefit in kind arising.”
Shawn Healy, employment tax director at BDO, added: “The exemption threshold increase is a welcome change.
“A lot of people traveling into [London] every year pay a lot more than £5,000 for a train season ticket.
“I don’t think it will have a dramatic effect, but it will be helpful because it cuts the P11D reporting requirements, that currently exist for loans over £5,000, and will produce a small tax saving for employees.”
Of course loans doubles each time the travel season comes. I personally do not get it: why the hell people refuse to save up during the entire year, but they rather choose to borrow money with sometimes very high interest. Some of my friends use payday loans, others are ok with emptying their credit cards…but very few have savings accounts or emergency funds or simply special funds for this matter. Don’t you think that this is very silly? Real troubles starts when the trip is over and reality where you have a debt is back!
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Has this measure been voted in yet?
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