Benefits
Cheap loans from your employer: how preferential loans are taxed
Last updated 16 October 2026
A loan from your employer below 4% for a home, or 13.5% for anything else, is a taxable benefit. The benefit is the interest you didn't pay.
Some employers, especially banks and larger companies, lend money to staff interest-free or at a low rate. If the rate you pay is below the 'specified rate' set by the Department of Finance, the loan is a preferential loan. The interest you save is a benefit in kind (a perk from work), taxed with income tax, USC and PRSI through payroll. It applies to loans to former employees and to spouses too.
The specified rates
| Loan | Specified rate |
|---|---|
| Qualifying home loan | 4% |
| Any other loan | 13.5% |
A qualifying home loan is one used to buy, repair, develop or improve a home. The home must be lived in by you, a former or separated spouse or civil partner, or a dependent relative who lives there rent-free. Using it to pay off an existing home loan also counts. You must give your employer a signed statement confirming the use.
Working out the benefit
The taxable amount is the interest at the specified rate, less the interest you actually paid in the year. Your employer can use the balance as it reduces, or the average of the opening and closing balances. It counts only the part of the year the loan existed. If your employer writes off any of the loan, the amount written off is taxed as pay in that year.
Some employers lend to the public as their business. They don't create a benefit if they charge you the same rate they charge customers, and that rate is below the specified rate. A lender can also use the fixed rate it would charge a customer on a staff loan to buy a home over a set term.
An example
An employee on €70,000 in 2026 has a €50,000 home loan from their employer at 1%. They also have an interest-free car loan of €15,000 that they repay to €10,000 over the year.
| Home loan: €50,000 × (4% − 1%) | €1,500.00 |
| Car loan: average balance €12,500 × 13.5% | €1,687.50 |
| Taxable benefit | €3,187.50 |
| Extra income tax, USC and PRSI for the year | €1,662.61 |
At current market rates, the home loan is still good value: the tax is far less than the interest a bank would charge. The car loan is less clear-cut, because 13.5% is higher than many personal loan rates, so the benefit taxed can exceed the real saving. Compare it with what a bank or credit union would charge you.
Work it out
Sources
- Revenue: Taxable employer benefits (medical insurance, shares and others) (checked 16/10/2026)
- Revenue: Tax and Duty Manual Part 05-01-01b: Benefit in kind on the provision of vehicles (checked 25/10/2026)
General information, not tax advice. HeyPenny is not a tax agent.