Benefit in kind re mortgage

sadsusie

Ive just discovered that I am now going to be paying an extra £70 per month inc tax due to a staff mortgage that I took out last year.The benefit I received has now been deducted from my personal allowance for the tax year.Surely it would be better to opt/switch this mortgage to a customer rate as the extra tax has come as a bit of a shock!Maybe I was naive but I didnt really understand Benefits in Kind and the tax implications.Any advise would be great/ could I pay more tax next year???

opinions4u

I believe the tax is calculated by subtracting your beneficial (staff) rate from the HMRC official rate.

2009/10 the HMRC rate was 4.75%.
2010/11 the HMRC rate is 4.00% (from memory).

If you are paying 3.00% on a £100,000 mortgage, they (HMRC) believe that you are effectively being paid an extra amount by your employer of £100,000 x (4% -3%) = £1,000. They will then tax you on this amount at your highest tax rate.

Your employer should really have made you aware of this tax at the time of applying for the loan. You are most likely paying tax on the benefit for both 2009/10 and 2010/11 in the new tax year. If this is the case the tax amount will drop back again in 2011/12.

Surely it would be better to opt/switch this mortgage to a customer rate as the extra tax has come as a bit of a shock

It depends on what rate you would pay on the public rate when compared against the staff rate plus tax liability.