# BIK - Preferential Loan



## PM1234 (2 Jan 2007)

Apologies if this is a duplicate question but I have trawled through so many posts I am very confused. I'd appreciate any help anyone could give on this: 

We have a joint mortgage. We have an option now of getting a preferential loan but how will this affect our tax/credits (single). We want to be fair to one another and from what I can gather, one income is taxed for BIK from gross pay. 

Does anybody have any recommendation on how to sort this out so its more equal or is taking the difference between BIK which will appear on the salary skip and just halving it fair? 


According to fixmytax.com ......

'If you receive a loan at a preferential interest rate you will have a BIK. This is based on the difference between the interest calculated at the specified rate and the actual interest paid. The specified rate is generally 12%, except where the loan is used in connection with your principal private residence when the specified rate is 6%'

Could somebody please interpret this for me? 

Thank you.


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## Domo (3 Jan 2007)

If you use preferential loan for your PPR, the BIK will be at the difference - e.g.

Loan €100,000 @ 3% interest paid = €3,000
Specified Rate = €100,000 @ 6% = €6,000

Therefore BIK = €3,000 (difference).

You will pay additional tax on this benefit.


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## bazermc (3 Jan 2007)

I dont think you mention this but is the pref loan from your employer?
If not, then no BIK will arise


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## bazermc (3 Jan 2007)

From the Ernst & Young Budget 2007 magazine

"Preferential home loans
and other loans​An employee who is in receipt of a
preferential loan is liable to income
tax on the difference between the
interest actually paid and the
amount which would have been
payable at the specified rate of interest
on the loan.
Due to the rise in interest rates,
the specified rate on home loans is
to increase from3.5%to 4.5%and
on other loans from 11% to 12%
with effect from1January 2007."

I think fixmytax.com is a bit out of date​


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## PM1234 (3 Jan 2007)

Thanks for your replies. 

So BIK is on the diff. between the standard rate and preferential rate only so for eg. if the standard rate is 5% and the preferential rate is 4% the BIK is applicable on 1% only? 




> Does anybody have any recommendation on how to sort this out so its more equal or is taking the difference between BIK which will appear on the salary skip and just halving it fair?


 
Thanks again for your help and explanations.


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