interest free loan

You have to calculate both in any situation If the difference is insignificant then choose the lower one for example if u calc the interest free loan by average method and the ans comes as 330 and the precise method gives u the ans as 300 so opt precise method as the difference is insignificant and so HMRC will allow yo to opt that

Either the taxpayer or HMRC may opt to use the strict actual basis. Therefore the taxpayer will do this if the assessment is lower whereas HMRC will do this if the actual assessment is higher. On that basis you will always use the actual method! In real life of course the taxpayer will probably make repayments through deduction from his monthly salary and therefore the average basis would then apply.