Staff Mortgage - BIK on partial amount

m0ns00n

Hi,

We are thinking of switching our mortgage to a staff mortgage with the bank my wife works for. My question is about the benefit in kind tax implications.

We would be looking to borrow ~£69k, but the staff rate is only available up to 4x her salary (which comes to £60k).

This means we will be borrowing £60k at 0.5% (tracks base rate) and the other £9k at SVR (need to confirm what this is, although I think it's about 3.5%).

Does the BIK tax only apply to the £60k, or does the other £9k get factored in somewhere?

I appreciate we would be talking about a relatively small amount extra if the £9k is included in the calculation. However, we plan to move house in the next 18-24 months, at which point we would be looking to borrow somewhere in the region of £150k, which may then have a significant impact.

Additionally, if the mortgage is taken out jointly, is the BIK split 50/50 between us? This could prove to be important as I may be in the 40% tax bracket later this year.

Thanks for any advice!

Wh05apk

The BIK will be solely in your wife's name.

You will be charged on the full £69,000, i.e. the difference between your total payment you actually pay, and the total you "should" have paid on the inland revenue official rate (which I think is a very high 4.99%!)

m0ns00n

Wh05apk wrote: »

The BIK will be solely in your wife's name.

This is certainly what I'd prefer as she is nowhere near HRT! However, I did read on another post that the benefit is split when it's a joint mortgage.

Wh05apk wrote: »

You will be charged on the full £69,000, i.e. the difference between your total payment you actually pay, and the total you "should" have paid on the inland revenue official rate (which I think is a very high 4.99%!)

The HMRC official rate is currently at 4%

http://www.hmrc.gov.uk/rates/interest-beneficial.htm


If I understand you correctly, does that mean we'll be taxed on 3.5% of £60k, and 0.5% of £9k (assumming the SVR is 3.5%)?

This seems a bit unfair, considering we're getting no benefit on that £9k. In fact, the SVR is probably higher than some of the fixes currently available!

clueless1682

When we moved and applied for a mortgage, part was on the staff rate and part was put onto a customer rate around, we couldn't automatically opt to have the rest on an SVR. It was a normal 2yr tracker open to all customers.

Possibly depends which bank it (I work for Halifax) is but best to check for definite what the interest on the remaining £9k will be so you can check out the figures.

Good luck!

m0ns00n

clueless1682 wrote: »

When we moved and applied for a mortgage, part was on the staff rate and part was put onto a customer rate around, we couldn't automatically opt to have the rest on an SVR. It was a normal 2yr tracker open to all customers.

Possibly depends which bank it (I work for Halifax) is but best to check for definite what the interest on the remaining £9k will be so you can check out the figures.

Good luck!

It's Halifax/Lloyds/BoS - take your pick! My wife is having a further discussion with the mortgage advisor in about 30mins, so should know more then.

Dave_Ham

I do not agree, I believe you only pay tax on the part that is in effect a "benefit"

Additionally, if you are going to increase your mortgage by that much I would forget this idea now - unless she is likely to get sensible increase in pay.

By the time the second product kicks in - which by the way is higher than you are thinking then it becomes counter productive as the additional cost vs rate topping leader is nominal..

See what you find out, good move for now, not if you are going to increase... only gut feeling and gut numbers though so do your homework as you appear to be doing.

m0ns00n

Dave_Ham wrote: »

I do not agree, I believe you only pay tax on the part that is in effect a "benefit"

Additionally, if you are going to increase your mortgage by that much I would forget this idea now - unless she is likely to get sensible increase in pay.

By the time the second product kicks in - which by the way is higher than you are thinking then it becomes counter productive as the additional cost vs rate topping leader is nominal..

See what you find out, good move for now, not if you are going to increase... only gut feeling and gut numbers though so do your homework as you appear to be doing.

Surely if it's a good idea for now, it would be worth doing?

When we come to move, we can get a different product if the staff rate turns out to be not worthwhile.

Wh05apk

Dave_Ham wrote: »

I do not agree, I believe you only pay tax on the part that is in effect a "benefit"

That would be the logical route, however, I think they lump the hole lot together as a "loan" even if split across 2 sub-accounts/mortgages, then use the total figure:

http://www.hmrc.gov.uk/manuals/eimanual/EIM26109.htm

Dave_Ham

Not essentially, as you will tie into a minimum of 2 years and then require a 3rd badly priced product.

Unless you somehow tie in your house purchase to when the fixed deal will be served...

m0ns00n

Dave_Ham wrote: »

Not essentially, as you will tie into a minimum of 2 years and then require a 3rd badly priced product.

Unless you somehow tie in your house purchase to when the fixed deal will be served...

Ah yes, the fixed term product :-)

I would be quite happy to wait 2 years and move once that ends. Just need to discuss that with the wife! She's a bit more eager to move than I am.

I do have the other £9k available in savings (S&S ISA), but I'm not sure using this would be wise, especially if I'm happy to wait for 2 years before moving.

getmore4less

Check what the T&C are when you change jobs.