The official rate of interest is set by Treasury regulations. Where possible changes are made from the start of a tax year, because this makes calculation easier.
Sometimes it is necessary to change the official rate during a tax year. If so the Treasury publishes an average official rate for the year which should be used where:
- a loan is outstanding throughout a tax year and
- the normal averaging method of calculation is used.
The normal averaging method is described at EIM26210.The official rate of interest changed from 6.25 per cent to 4.75 percent from 1 March 2009, the average rate for the 2008-09 year is 6.10 per cent.
Foreign currency loans
For information on loans made in a currency outside the United Kingdom see EIM26105.
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