What is Code 3807 on a South African Payslip?
Employer loan and interest subsidy fringe benefits explained — how the SARS official interest rate works, when a benefit arises, the worked example, and IRP5 reporting.
3807Code 3807 is a loan or interest subsidy fringe benefit. When your employer lends you money at no interest or below the SARS official rate (currently 8.00%), the interest saving is a taxable fringe benefit. The taxable value is the difference between the official rate and the rate you actually pay, applied to the outstanding loan balance each month.
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What Code 3807 Means
Code 3807 covers the fringe benefit that arises when an employer lends an employee money — for a car, a study cost, or any other purpose — at no interest or at a rate below what SARS calls the "official rate." Under the Seventh Schedule to the Income Tax Act, the interest you save by borrowing cheaply from your employer rather than a bank is treated as income, even though you never receive that saving as cash.
The official rate is set at the SARB repurchase rate plus one percentage point, and it moves every time the Reserve Bank's Monetary Policy Committee changes the repo rate. This means a code 3807 fringe benefit isn't a fixed monthly amount for the life of the loan — it fluctuates with both the outstanding balance (as you repay the loan) and the official rate itself, so payroll must recalculate it whenever either changes.
| Item | Example A (Interest-free loan) | Example B (Below-rate loan) |
|---|---|---|
| Loan amount outstanding | R50,000 | R50,000 |
| SARS official rate (p.a.) | 8.00% | 8.00% |
| Rate charged by employer | 0% | 5% |
| Rate shortfall | 8.00% | 3.00% |
| Annual taxable fringe benefit | R4,000 | R1,500 |
| Monthly taxable value (code 3807) | R333/month | R125/month |
Because the official rate is tied to the SARB repo rate, your code 3807 fringe benefit value changes whenever the Monetary Policy Committee adjusts rates. A rate cut reduces the official rate, which reduces your fringe benefit. A rate hike increases it. Your employer should update the fringe benefit calculation after each MPC announcement — if your payslip does not reflect a rate change, raise it with your payroll department.
Small Loan Exemption
Not every employer loan triggers code 3807. The Seventh Schedule exempts loans where the total outstanding balance across all loans from the employer is R3,000 or less — so an emergency salary advance of R2,500, for example, generates no taxable fringe benefit at all, regardless of the interest rate charged. The exemption applies to the combined outstanding balance, not per loan, so an employee with two smaller loans that together exceed R3,000 would still have a fringe benefit calculated on the excess.
Study loans and bursary-linked loans that qualify under the bursary exemption rules (code 3820) are also excluded from code 3807 — they're assessed separately under the bursary provisions rather than the general loan fringe benefit rules.
Frequently Asked Questions
What does code 3807 mean on my payslip?
Code 3807 is a loan or interest subsidy fringe benefit. When your employer lends you money at no interest or at a rate below the SARS official interest rate, the interest you save is deemed to be a taxable fringe benefit. The taxable value equals the difference between the official rate and the rate you pay, multiplied by the outstanding loan balance each month. PAYE is deducted on this deemed interest saving.
What is the SARS official interest rate for loan fringe benefits?
The SARS official rate of interest is the South African Reserve Bank repurchase rate plus 1 percentage point. As at June 2026, with the SARB repo rate at 7.00%, the official rate is 8.00% per annum. This rate changes whenever the SARB adjusts the repo rate — your employer must recalculate the fringe benefit value after each MPC announcement. Always verify the current official rate at sars.gov.za.
When does a loan from my employer create a taxable fringe benefit?
A taxable fringe benefit arises whenever an employer lends money to an employee at a rate below the SARS official rate. An interest-free loan creates the largest benefit — the full official rate applied to the balance is taxable. A below-official-rate loan creates a smaller benefit — only the shortfall is taxable. If the employer charges the official rate or above, no fringe benefit arises and code 3807 does not appear on your payslip.
How is the taxable value of an employer loan calculated?
Monthly taxable value = (Official Rate - Actual Rate) x Outstanding Balance / 12. For a R50,000 interest-free loan at an official rate of 8.00%: (8.00% - 0%) x R50,000 / 12 = R333.33/month. This amount is added to your taxable income and PAYE is deducted at your marginal rate. As you repay the loan, the outstanding balance falls and the monthly fringe benefit value decreases proportionally.
Does an employer housing bond subsidy create a code 3807 fringe benefit?
Yes. If your employer subsidises your home loan by paying a portion of your mortgage interest — for example, paying the difference between your bond rate and a lower preferential rate — the subsidy value is a taxable fringe benefit under code 3807. The taxable value is the rand amount of the interest subsidy received. This is distinct from employer-provided accommodation (code 3805), which covers situations where the employer owns the property.
Does code 3807 appear on my IRP5?
Yes — the annual total taxable value of the loan or subsidy fringe benefit appears as code 3807 on your IRP5 and is included in your gross income. PAYE was deducted monthly on the deemed interest benefit. Note that the loan itself is not income — only the interest saving is the fringe benefit. The principal you borrowed and repay has no tax implications beyond the interest fringe benefit.