Personal Tax -Practice assesment 2 -Task 2 c

michelleapo15

I do understand how how answer was calculated for the following:
"Mr C received two interest free loans from S Ltd: £7400 in January 2023 and £ 9200 in November 2023." What is the taxable amount?
The answer is £270 but cannot work out how did they got to that answer as my calculations were as follows:
7400 x 3/12 x 2.25% = 41.63 ( if 7400 relates to year 22/23 then we would ignore it)
9200 x 5/12 x 2.25% = 86.25
So my calculation result is nowhere near 270.Please help understand.

SPS

Hi,

The benefit in kind for interest free loans in not based on number of months, it is based on an average.
Tax year 1
(7400/2) x 2.25% = £83.25
Tax year 2
((7400+9200)/2) x 2.25% =£186.75

83.25+186.75 = £270

Hope this helps.

soahsoa

SPS said:

Hi,

The benefit in kind for interest free loans in not based on number of months, it is based on an average.
Tax year 1
(7400/2) x 2.25% = £83.25
Tax year 2
((7400+9200)/2) x 2.25% =£186.75

83.25+186.75 = £270

Hope this helps.

I did my own calculation and I also got £270 but I did it slightly differently.
Wouldn't there be NIL tax due in year 1 because the loan did not exceed 10k?

I calculated £270 due in year 2 (16600+7400)/2*2.25% = 270