Impact on mortgage?

gazza975526570

Hi

I work for a bank and recently took out a 5 year fixed rate at 5.49% for £103,000. At the time the rate used by the tax offcice to determine any benefit in kind was 5%.

Ive just received an email from my employers advising from the recent budget this has now increased to 6.25%

Can anyone tell me how much extra this will cost me? Apologies but i cant work out what i need to do to determine it

Thanks

silvercar

Your benefitting by 6.25-5.49%=0.76%. on 103,000 this is £782.80 over the year. You pay tax on this benefit at your marginal rate, so at 22% that is £172 per year and at 40% it is £313 per year.

gazza975526570

Thanks for that.

I just couldnt quite work out how it was applied and the amount i made it out to be was ridiculously high!!

MarkyMarkD

If you work for a bank, but the product you have bought is one available to any normal customer (and 5.49% for five years sounds quite normal) then it's not a taxable benefit at all.

The only reason it would be, is if the bank lets you off some of the fees or something like that, making it a different product than the customers can buy. But that would mean that you are paying quite a bit of tax for what is possibly quite a small benefit.

I think you should clarify why this is meant to be a taxable benefit at all.

gazza975526570

From the above it must then be due to the fact all set up charges are waived. Think the customer fee is £500

The 5.49% was also 0.7% cheaper than the normal customer rate so im gessing on the rate im saving around £700 per year

All in all seems def worth the extra tax

MarkyMarkD

6.19% is a completely appalling 5 year fixed rate, so I'm not sure that you are getting much of a benefit, still.

You could get a 5.23% or so 5 year fixed mortgage elsewhere, and not have to pay tax on it. And the fees would be less than the tax that you will pay on your "benefit".

I'm not sure that you have really done the right thing in taking this "beneficial" staff mortgage.

gazza975526570

Not wishing to have an argument however when i arranged the mortgage at that rate it was by far (well by over a quarter of a percent) the market leader.This was confirmed by a mortgage broker i saw and on the mortgage board on this site. So to be fair the percentage rate isnt really up for discussion and wasnt what i needed a response on - im savvy enough to ensure im getting a good deal. I never said the customer rate was a good deal. The fact there is no arrangement or end fee - in addition to the fact i can add extra borrowing with no fees for me made this the perfect deal.

The question i posted has been answered in a clear manner on a previous post and i thank him for that

MarkyMarkD

That must have been in this thread:

gazza975526570 wrote: »

Hi

My employers are offering a 5 year fixed rate at 4.69% with no application fee's, allow 10% overpayment a year. Ive been accepted for this deal after having a look round some comparison sites i found this to be a good deal.

A few people are questioing if this is such a good deal.

Does anyone know of anywhere that could beat this?

where the rate was 4.69%! No wonder everyone thought it was a bargain - 4.69% would have been whilst 5.49% is not.

Anyway, I'm glad that you believe you've got a good deal and that your tax question has been resolved.

gazza975526570

Thanks for taking the time out to search through the last year of my threads!!! Having said that you have helped me out here.

There was me arguing my cause when the 5 year deal was lower than i thought - after looking at my paperwork it is actually 4.69% - see i told you it was a good deal!!!;)

Guessing now my new tax liability will be higher than originally thought due to my memory lapse!!

MarkyMarkD

LOL, glad to be of help. I can now see why you are happy with your deal - 4.69% fixed was a good deal even 6 months ago (when fixed rates were a fair bit lower than they are now). Sorry that your tax bill will be even higher.

silvercar

silvercar wrote: »

Your benefitting by 6.25-5.49%=0.76%. on 103,000 this is £782.80 over the year. You pay tax on this benefit at your marginal rate, so at 22% that is £172 per year and at 40% it is £313 per year.

At 4.69% rate the figures now become:

Your benefitting by 6.25-4.69%=1.56%. on 103,000 this is £1606.80 over the year. You pay tax on this benefit at your marginal rate, so at 22% that is £353.50 per year and at 40% it is £642.72 per year.

So more tax to pay but at least your saving more money