New SARS Interest Rate Drops to 8.25%

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SARS has dropped the official interest rate for calculating fringe benefits on low-interest or interest-free loans to 8.25% per annum, effective 1 June 2025. This replaces the previous rate of 8.50%.

Why This Matters for Employers

If you’re offering staff loans at zero or below-market interest, the difference between your rate and SARS’s official rate is seen as a taxable benefit. You’ll need to include that value in the employee’s gross income and make the correct PAYE deductions.

What Accountants and Payroll Teams Must Do

Update your payroll systems now to reflect the new rate. Get ahead of questions from employees and clients by proactively explaining how this could impact their tax deductions. For example, an employee receives a R100,000 interest-free loan. Under the new 8.25% rate, they’d be taxed on R8,250 as a fringe benefit for the year, updating this calculation can avoid unexpected PAYE shortfalls.

Trusts and Section 7C

This rate isn’t just for employer loans. Under Section 7C of the Income Tax Act, interest-free or low-interest loans to trusts—especially those used in family business or estate planning structures—may trigger deemed donations if interest is not charged at the official rate. This can result in donations tax liabilities, so it’s essential to review these arrangements regularly.

For more information, read more here: Interest Rates – Table 3.