The Official Rate of Interest (ORI) will increase from 2.25% to 3.75% on 6 April 2025. This marks the first increase in the ORI since 2023, and it is a substantial one – surpassing 3.00%, a level last seen in 2017.
The ORI is used to calculate the Income Tax charge on the benefit of employment-related loans and the taxable benefit of some employment related living accommodation.
Up to now, the ORI has been assessed on an annual basis, however, the government announced at Autumn Budget 2024 that the ORI would be reviewed quarterly and updated if necessary to reflect changing interest rates. The ORI may increase, decrease or be maintained – with any changes taking effect on 6 April, 6 July, 6 October and 6 January.
Reviewing the ORI on a quarterly basis allows for updates to be made ‘in year’, ensuring employment-related beneficial loans and living accommodation are correctly valued.