help, brain on overload

begbeer

We have an interest only mortgage which at the moment stands at 165k, it is at a fixed rate of 5.29% until end july this year, We are in a position to pay of 50k in August, the property in question is rented out at £565 a month plus at the moment £200 for the outbuildings but the rent for the outbuildings might be stopping soon. Now my question is, obviously depending on interest rates at the time would I be better putting the 50k in an savings account as paying it off the mortgage would probably send me into the higher tax bracket ( our mortgage reverts back to 1.95% over base in august)
Hope this makes sense

Meeper

I assume that paying off a chunk of your mortgage would push you into higher rate tax because of the reduction in the amount you are able to offset against the rent?

If so and you would therefore *only just* fall into HRT bracket, it will be only on a very small amount so the difference would be negligible in terms of your income tax.

Being an HRT may have an effect if you have other savings and investments though, and if you are a HRT you will be able to claim tax relief of pension contributions at the higher rate so there are potentially benefits to it also.