Staff Interest Rates and Benefit Tax??

Shortie

Hi

I'm hoping someone can explain this to me quite simply please as I'm not always the most clued up on interest rates etc...

I work for a bank and an eligable for preferential rates on a fixed rate mortgage. Although the rate for 2 years is very good, I'm not sure how to work out the effect of the 'Benefit in Kind' (is that the right name), and therefore tell if it really is going to be worthwhile going for... My undertsanding is that I would be taxed on the difference between the fixed rate I get and the standard variable rate each month

I'm not sure if this helps (or if there's just an online calculator I could lug the details into) but here are the details of the quote from my workplace:

Rate: 4.99%
Fixed: 2 years
Loan Amount: £160k
Loan Persiod: 21 years

No fixing fee, solicitors fees or valuation fees.

Many thanks :A

ptee

We have a calculator at work which tells us what effect it will have on tax. I'm not 100% but I'm pretty sure that its along the lines of you will have to pay tax on the difference between the offical rate (6.25%) and your staff rate (4.99%) and they do this by reducing your tax code appropriately.

So for you it would be....

Official Rate:
160,000/100*6.25 = £10000

Staff Rate:
160000/100*4.99 = £7984

So you will have to pay tax on £10000-£7984 = £2016

at basic rate that would be £403.20 ish in tax.

So if your tax code was 503 then it would be amended to 463.

I'msure somebodymore knowledgable will give you more accurate figures.

Hope that makes sense :cool:

silvercar

Agree with ptee, its the difference between the official mortgage rate and the rate you get, so it could be more beneficial to find a mortgage yourself and not take the staff rate.

if the official rate is 6.25% you pay tax on the difference between your rate and 6.25%. so for a basic rate tax payer your tax will be 20% of the difference and 40% at higher rate so a 4.99% rate actually costs you 5.24% (basic) or 5.5% (higher).

I think ptee is right about the amount of tax but not the tax code - that would increase by the benefit amount AFAIK.

Shortie

Thanks both

Someone in work said they worked it out that at the moment it's better to go for your own mortgage (I've had a quote for 2yr fixed at 5.29% with Halifax as the next cheapest alternative). I just wanted to check with you knowledgable chaps :A

Apparently our place are looking for ways round it to make it a good deal again for staff, but I don't expect it'll be anyweher in time for my remortgage.

Thanks again