Free UK family loan tool

Minimum Interest Rate for a Family Loan in the UK

There is no single government-set minimum rate for every ordinary private family loan in the UK. Compare 0% with a chosen rate and see the repayment difference.

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Answer first

What is the minimum interest rate I can charge on a family loan?

For an ordinary private loan between family or friends, the parties can agree on 0% or another rate. The useful question is whether the rate is clear, affordable and recorded for both people.

What is the minimum interest rate for a family loan? In the US the IRS sets one — the applicable federal rate, republished every month — and charging less can create imputed interest. In Australia and the UK there is no minimum at all, though a 0% loan still has consequences worth knowing. Check yours, then create a signed loan agreement with Chipkie.

How to use it

Compare a family-loan rate in three steps

1
Enter the loan details
Add the amount, term, repayment frequency and first repayment date.
2
Compare 0% and a chosen rate
See how the repayment amount and total interest change.
3
Record the decision
Agree the rate and repayment plan, then keep both people working from the same terms.

Useful context

Interest received can count as taxable savings income

HMRC explains that tax on savings interest depends on total income and available allowances. If a family lender charges interest, keep a record of what was received.

Minimum family loan interest FAQs — UK

What is the minimum interest rate for a family loan in the UK?

There is no single government-set rate that applies to every ordinary private family loan. The parties may agree on 0% or another clearly recorded rate.

Can I charge 0% interest to family in the UK?

Yes. The principal can still be repayable even when the interest rate is 0%.

What interest rate should I charge family or friends?

Choose a rate both people understand and can afford. Compare 0% with a custom rate, the repayment amount and the total interest before agreeing.

Is interest from a family loan taxable in the UK?

Interest received can form part of taxable savings income. The amount of tax depends on the lender’s income and available allowances.

Does the US Applicable Federal Rate apply in the UK?

No. AFR is an IRS benchmark for US federal tax purposes and is not the minimum rate for a UK family loan.

Should the rate be written down?

Yes. Recording the rate, amount, repayment frequency and start date gives both people the same reference point.

Found a rate that works?

Set up and track the family loan for free in Chipkie, with the agreed rate and repayments in one shared place.

Create a loan →