Staff Mortgage - BIK on partial amount

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...

Just got a KFI - early repayment charge would be very low, as it's only based on the amount borrowed for part 2 of the mortgage. If it were £9k, it'd only be £180 to repay early (2% of amount borrowed).

Dave_Ham

Wh05apk wrote: »

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

Whilst I concur it reads being treated as "one loan" the benefit will only be on the part that benefit is obtained treated as one loan or two then same end result.

Be careful and remember your employer, specifically if she is Halifax side will not automatically effect your tax status and apply across..

Once done suggest she calls relevant HMRC holding centre to advise

Thrugelmir

Dave_Ham wrote: »

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

The "benefit" is the lower rate of interest that is paid due to one of the applicants being an employee of the lender.

So the whole amount of the mortgage is assessable as a BIK on the employee.

Dave_Ham

Assessable I agree, although will have no effect on the overall issue...

m0ns00n

I just had a thought, which may end up being nonsense...

Would it be possible for me to take the staff mortgage of £60k, and use that to reduce my current mortgage down to £7k (the original £9k was including an early repayment fee of £1600).

I would therefore have 2 mortgages, but could ensure I don't pay off my existing mortgage until the fixed rate ends in April.

Dave_Ham

Afraid not no, they would both only lend on the basis of first charge..

opinions4u

m0ns00n wrote: »

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%).

Make sure tey include on target bonus in their income calculation. That might help squeeze out a bit more at 0.5%.

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

The whole amount based on the average interest rate.

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.

The HBOS staff product is great then, due to the lack of fees and ERC. When you move I'd suggest shopping the market if less than half will be at staff rate.

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!

The employee has the tax liability.

m0ns00n

Dave_Ham wrote: »

Afraid not no, they would both only lend on the basis of first charge..

Ah well!

It seems part 2 of the mortgage (the £9k) would be a 2 year fixed rate of 4.24%.

What I'm thinking now is to take out a loan of £9k for somewhere between 1-2 years. Something is telling me this would be more beneficial than taking part 2 of the mortgage, but I'm not sure why! I believe it's because I'd be able to repay the full £9k over the 2 years, and therefore be subject to less interest than having it as part of the mortgage.

Wh05apk

m0ns00n wrote: »

I just had a thought, which may end up being nonsense...

Would it be possible for me to take the staff mortgage of £60k, and use that to reduce my current mortgage down to £7k (the original £9k was including an early repayment fee of £1600).

I would therefore have 2 mortgages, but could ensure I don't pay off my existing mortgage until the fixed rate ends in April.

If you have an ERC of £1600 are you sure t would still be worthwhile to change, once the BIK is taken into account I doubt if you will see much if any saving?

m0ns00n

Wh05apk wrote: »

If you have an ERC of £1600 are you sure t would still be worthwhile to change, once the BIK is taken into account I doubt if you will see much if any saving?

The saving will be marginal - possibly only about £100 (although it it should still be a saving!)

However, this particular staff mortgage is only available until the end of August. The common concensus is the one that replaces it won't be as good, which is why I'm keen to switch now.