Employee mortgage and tax implications

Glastoun

I can get an employee mortgage that is (I think) base rate plus 2.25% (so 2.75% at the moment). Regardless of whether this is a good deal, what are the tax implications given that the HMRC rate for such loans is 3.25%? How much would I have to pay in tax per year?

I'm a basic rate taxpayer, repayments would probably be £750 per month with £90k outstanding. Mortgage would be offset, but if I had to set a time period for repayment then probably 15-20 years.

What would happen when the base rate, and then presumably HMRC's rate, rises?

Thrugelmir

You'll pay tax on the notional benefit as your actual interest rate is lower. So say for example you pay £500 less in interest (3.25% - 2.75% = 0.5% * £100k = £500). As a basic rate taxpayer you'll pay 20% on the benefit i.e. £100.

Glastoun

Would this extend to any interest payment reduction caused by savings that were in the offset accounts? So if our offset savings meant us paying £500 less interest in a year, would the total tax bill in the example given then be £200?