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FTB Staff Mortgage - Benefit in Kind Tax
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TheShadowMan
Posts: 21 Forumite
Mornin' all!
Can someone please explain this to me?
My partner works for LLOY and we can have a staff mortgage at BoE Base rate.
I understand this is classed as a taxable benefit but I'm not clear on what that really means money wise.
She earns 28k and I earn 24k.
If we borrowed 120k that would all be on the staff rate product so without the tax implications that would be about £425 per month minimum payment based on 25 years repayment.
Can someone explain what the tax implications would be in this scenario?
Can someone please explain this to me?
My partner works for LLOY and we can have a staff mortgage at BoE Base rate.
I understand this is classed as a taxable benefit but I'm not clear on what that really means money wise.
She earns 28k and I earn 24k.
If we borrowed 120k that would all be on the staff rate product so without the tax implications that would be about £425 per month minimum payment based on 25 years repayment.
Can someone explain what the tax implications would be in this scenario?
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Comments
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HMRC has a published acceptable "going rate" for a mortgage. You deduct the rate you will pay, from the HMRC rate and the difference is the rate at which the benefit in kind is calculated.
http://www.hmrc.gov.uk/rates/interest-beneficial.htm
Using your case, your rate appears to be around 0.5% per annum?
So, the benefit in kind will be 4% - 0.5% = 3.5% of £120,000, or £350 per month, leaving a basic rate taxpayer with an increase in his/her tax bill of £70 per month, or £840 per annum.I am a mortgage broker. You should note that this site doesn't check my status as a Mortgage Adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice. Please do not send PMs asking for one-to-one-advice, or representation.0 -
kingstreet wrote: »HMRC has a published acceptable "going rate" for a mortgage. You deduct the rate you will pay, from the HMRC rate and the difference is the rate at which the benefit in kind is calculated.
http://www.hmrc.gov.uk/rates/interest-beneficial.htm
Using your case, your rate appears to be around 0.5% per annum?
So, the benefit in kind will be 4% - 0.5% = 3.5% of £120,000, or £350 per month, leaving a basic rate taxpayer with an increase in his/her tax bill of £70 per month, or £840 per annum.
Thank you, that seems to make sense.
I was told that due to this extra tax staff mortgages are usually not worth it and beatable, but I have done a comparison and the staff offer seems to be the winner.0 -
The rate is effectively 3.5% x 20% tax = 0.7% plus 0.5% (the actual rate).
So if you can beat 1.2% elsewhere, go for it!
Obviously you have three key things that change the "price":
1) BofE rate.
2) The HMRC official rate of 4%.
3) Your highest rate of tax, currently 20%.
Last I heard LBG were getting rid of that rate for new borrowers. So move fast if you want it.0 -
If you have the whole mortgage it is pretty much always worthwhile. I do seem to recall that if you have part on staff rates and part on public terms (i.e. the company have a capped amount at staff rates), then it might not be worthwhile as HMRC don't split the staff rate element out and assume that it applies to the whole amount.
TheShadowMan - Quick question. Is your partner from the LTSB or HBOS side of the business? The reason I ask is that I'm on the HBOS side and I know that the staff mortgage scheme is changing in May of this year and the rumour I heard was that it was going to mirror the LTSB staff scheme. I'm currently on the same type of deal as above currently, but in the process of moving and know that if I don't commence the mortgage application before May I'll be on the new scheme.0 -
Hello Kingstreet,
A very informative thread!
I have another question on this topic if you don't mind...
My wife and I have a staff mortgage (we both work for the same bank) but it is based on her salary only. But looking at my tax documents, my tax code has been reduced due to an 'employer loan'? I have no loans with my company so I am assuming it must be to do with the staff mortgage.
My question is, if the staff mortgage is based on my wife's salary only, should my tax code be affected?
I am waiting for my P60 to have a good look at all the tax code business!
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It doesn't matter whose salary the mortgage borrowing was based on. If you are party to a joint mortgage, 50% of the benefit in kind is attributable to you.
You need to check you are both being charged the same amount, 50% of the BIK and not two lots of 100%.
You need to look at your coding notices for the beginning of the tax year to see how much is being taken from your tax code for this.I am a mortgage broker. You should note that this site doesn't check my status as a Mortgage Adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice. Please do not send PMs asking for one-to-one-advice, or representation.0 -
Hi, on a similar thread, I have a staff mortgage and have an issue which I'd love your thoughts on. Mortgage lenders have a responsibility to clearly demonstrate the typical APR of a loan. However, with a staff mortgage the true amount you repay isn't the amount you actually pay because of the tax implications. The staff mortgage lender knows there are tax costs, and at the time of issuing an offer, or indeed amendment to mortgage interest rate would know the HMRC rate at which tax is charged, so surely they should quote a typical APR considering both interest rate and taxable benefit? This way staff members really have transparency on what the costs are.
Just a thought and I'd be keen to know what you think. Don't see why bank staff members shouldn't have the same rights as a "normal" customer.0 -
Much will depend on the individuals own tax status. As to their liability.0
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happymoocow wrote: »Hi, on a similar thread, I have a staff mortgage and have an issue which I'd love your thoughts on. Mortgage lenders have a responsibility to clearly demonstrate the typical APR of a loan. However, with a staff mortgage the true amount you repay isn't the amount you actually pay because of the tax implications. The staff mortgage lender knows there are tax costs, and at the time of issuing an offer, or indeed amendment to mortgage interest rate would know the HMRC rate at which tax is charged, so surely they should quote a typical APR considering both interest rate and taxable benefit? This way staff members really have transparency on what the costs are.
Just a thought and I'd be keen to know what you think. Don't see why bank staff members shouldn't have the same rights as a "normal" customer.
So these are the bank staff that are advising ordinary customers looking for a mis-selling claim; might e worth a punt but could hurt your career prospects.0 -
Bank staff is also ordinary people (ordinary tax payers).
Not all fingers are of the same size...0
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