Mortgage Perk = Tax Implications = Really Worth It ???

BurntOut

On my current mortgage I have a % at the base rate 0.5% (employer perk) & the rest @ 3.5% standard variable.

My mortgage is about £106K

For the next tax year 12/13 my code is going to be 333L. I only have one job so if I wasnt on the employer perk I would be 747L.

Is it really worth it being on the employer perk as now I will be paying substantially more tax????

PS I earn 16k

jem16

BurntOut wrote: »

Is it really worth it being on the employer perk as now I will be paying substantially more tax????

PS I earn 16k

You will pay £954 extra in tax.

Are you saving that amount on your mortgage? I can't tell as you don't say what percentage of your mortgage is at 0.5%.

BurntOut

jem16 wrote: »

You will pay £954 extra in tax.

Are you saving that amount on your mortgage? I can't tell as you don't say what percentage of your mortgage is at 0.5%.

Hi Jem

Many thanks for the quick reply. I am normally good with numbers but this tax business just goes right over me:rotfl:.

I found my docs and back in 2010 when it was £111k
£54K was @ 0.5
£57K was @ 3.5

So around 50% @ 0.5. :beer: by the way.

jem16

BurntOut wrote: »

So around 50% @ 0.5. :beer: by the way.

So you are saving 3%pa on £53k? That's a saving of £1590 which is more than the extra tax you are paying.

BurntOut

jem16 wrote: »

So you are saving 3%pa on £53k? That's a saving of £1590 which is more than the extra tax you are paying.

So stick with it then LOL, I had been considering coming out of the mortgage perk.

Many many thanks

opinions4u

Here's what I posted on your deleted thread in mortgages:

I'll assume you have 4 x income on the 0.5% rate - so £64k. If your income has increased since taking the mortgage they may be able to increase your amount on staff rate - perhaps based on salary plus on target bonus?

The official HMRC rate is 4% so they tax you on (4% - 0.5%) = 3.5% of that figure.

So that's £2,240 of taxable value x 20% = £448 additional tax a year.

If you can replace the debt with a rate below 2.3% (that's roughly your average rate including tax liability) then you'd be better off. But I doubt you can, so I'd stick with it.

As for your tax code, it looks like you've had 2 years benefit included - so you paid nothing for the previous tax year (but should have done) so they've collected double this year. I assume there's a further adjustment for the new tax year which will improve your tax code?

Additionally, if you wear a uniform at work, you should be able to claim a tax allowance against the cleaning of that.

https://forums.moneysavingexpert.com/discussion/27967

BurntOut

opinions4u wrote: »

Here's what I posted on your deleted thread in mortgages:

I'll assume you have 4 x income on the 0.5% rate - so £64k. If your income has increased since taking the mortgage they may be able to increase your amount on staff rate - perhaps based on salary plus on target bonus?

The official HMRC rate is 4% so they tax you on (4% - 0.5%) = 3.5% of that figure.

So that's £2,240 of taxable value x 20% = £448 additional tax a year.

If you can replace the debt with a rate below 2.3% (that's roughly your average rate including tax liability) then you'd be better off. But I doubt you can, so I'd stick with it.

As for your tax code, it looks like you've had 2 years benefit included - so you paid nothing for the previous tax year (but should have done) so they've collected double this year. I assume there's a further adjustment for the new tax year which will improve your tax code?

Additionally, if you wear a uniform at work, you should be able to claim a tax allowance against the cleaning of that.

https://forums.moneysavingexpert.com/discussion/27967

Opinions4u, apologise, yea I thought the post was more apt here than mortgages. Previous tax code 11/12 was 547L. On the latest tax code letter it says that they informed me I owed £181.09 from a previous tax yr - you may remember us telling you about this....eh NO.......hence the 333L.

Sadly no uniform

getmore4less

I seem to remember reading that the full loan might be liable for the tax even if only part of it is at a BIK rate.

Something worth checking