Tax implications of a HBOS staff mortgage

411444

In Febuary 2010 I took out an interest only HBoS staff mortgage for £193,166 for a term of 13 years. The mortgage was split by £156,600 being charged at Bank od England base rate of 0.5% and £36,566 charged at the standard variable rate of 5.19%.

I would like to know if you think I have been mis-sold this mortgage because of the following reasons: -

1. I cannot afford to pay the mortgage off at the end of the term.

2. I wasn't made aware, by the HBoS mortgage advisor, that I would have to pay tax on the benefit in kind at the time of taking out the mortage.

3. I was not made aware, by the HBoS mortgage advisor, that HMRC would calculate the tax on the benefit in kind using the total mortgage amount of £193,166 instead of using £156,000 which where I am receiving the benefit, the interect rate of 0.5%

DannyboyMidlands

Wow, I wish they'd miss-sell me one of those.

Seriously though, you get a mortgage of which the vast majority is at an IR of 0.5% and you want to moan about it?

How did you plan to pay it off at the end of the term?

The_J

For 1. Pretty sure the KFI would have been crystal clear that you would have to pay that money back at the end. You've still got 11 years to pay the mortgage off, get busy.

Why was the mortgage split in that way? Seems a bit odd.

The rate you had/have is way way way way WAY WAY WAY WAY better than anything else on the market. Even with the tax added on, how are you going to show the ombudsman you have lost out? You aren't because you haven't.

Don't think you're going to find much sympathy here, I'd start working on that interest.

Dave_Ham

Unbelievable..

You work for a bank and do not understand the implications of interest only mortgage....!

What really tickles me and I am laughing out loud here, is I think you have used your employee number as your username??

Come on - is this a joke post...

If it is, please do not tell me as having too much fun

411444

Believe it or not, the tax implications makes it not worth while having the staff mortgage, I would have been better off looking for the best deal on the market without a doubt. Also, if cancelled the mortgage, I would still have to pay the tax for a certain period of time because the tax is always a year or so behind. So that on top of paying the standard variable rate on £193K would be too much per month, so it looks like I am stuck with it.

Dave_Ham

No chance - bad tax advice and I mean no chance at all it would not be better than a majority of your product at 0.5%

opinions4u

411444 wrote: »

In Febuary 2010 I took out an interest only HBoS staff mortgage for £193,166 for a term of 13 years. The mortgage was split by £156,600 being charged at Bank od England base rate of 0.5% and £36,566 charged at the standard variable rate of 5.19%.

Which brand have you used? I would assume Halifax. If so the SVR will be 3.50% or 3.99%. More likely the 5.19% rate is another product.

1. I cannot afford to pay the mortgage off at the end of the term.

Why not? You are in a job with a salary close to £40k a year and a benefits package on top. Are you really so stupid as to take a mortgage out without having the means to repay the capital?

2. I wasn't made aware, by the HBoS mortgage advisor, that I would have to pay tax on the benefit in kind at the time of taking out the mortage.

Unless things have changed since my day, staff mortgages are not sold on an advised basis. Documentation issued makes it quite clear that you are responsible for the choice of mortgage and also for any potential benefit in kind tax liability.

All the internal communications issued by HBOS (and more recently LBG) clearly reference benefits in kind tax, including calculators.

3. I was not made aware, by the HBoS mortgage advisor, that HMRC would calculate the tax on the benefit in kind using the total mortgage amount of £193,166 instead of using £156,000 which where I am receiving the benefit, the interect rate of 0.5%

It is explained in a wide range of online resources that you have access to through your employer. If the additional rate is 5.19% this will actually help to reduce your overall tax liability.

I make your average rate 1.40%. The HMRC official rate is 4.00% so a liability falls on 2.60%. I assume you're a 40% taxpayer so 2.6 x 40% = 1.04%. Basic rate taxpayer would be 0.52%.

Your effective rate (interest plus tax liability) is 1.40% + 1.04% = 2.44%.

You have a right to complain of course. But you chose to take this mortgage. You were not advised to.

With an effective mortgage rate of 2.44% I'd be quite interested to know where you could have got better.

You might find that you are getting an adjustment to your tax code for 2011/12 or 2012/13 to recover tax not piad for 2010/11 and 2011/12. Once this has been paid your tax code will improve in the following tax year as HMRC will only be collecting benefit in kind tax for the current tax year.

Even with the benefit in kind tax I think you've got a bloody good deal.

411444

This is the first time I have used one of these sites and the messages I have received so far have obviously show me that I was extremly naive in expecting some useful help.

kingstreet

Did you use an "advised" service where the mortgage product was recommended after an analysis of your circumstances? Do you have a suitability record where the adviser set out the reasons that particular product best suited your needs?

If so, could you post the reasons back in your thread?

If you didn't and went "information-only" and picked the product yourself, there is no route for you to claim for being mis-sold.

Dave_Ham

Sensible posts = sensible answers

Stupid posts = what you are getting

Does no-one else think it is funny that you came on to moan about Halifax using your employee number as username - I am actually still laughing

The_J

411444 wrote: »

This is the first time I have used one of these sites and the messages I have received so far have obviously show me that I was extremly naive in expecting some useful help.

I am more than willing to help anyone who has been misled or lost a lot of money based on poor advice.

You are neither of those.

Opinions4u has spent a lot of time explaining exactly why you have no case. It's far more than I would have done. He has saved you a number of hours work complaining, for that I would be grateful.