Pay off

Eagle_beak

I have six years left on my mortgage and would like to cash in shares to pay it off. I owe £22000 and I pay about £100 per month interest. I need to cash in about £10000 and I will get taxed about one third on those shares. I have enough tax free shares to cover the rest. is it worth paying tax on shares against what I will pay in interest over the six remaining years

jamesd

Assuming average investment returns it is not worthwhile unless you have an exceptionally expensive mortgage and you don't. Even investment returns that only match your mortgage interest rate would cause this to be so as long as your mortgage interest rate is less than the either 18% or 28% CGT rate that you'd pay above the annual allowance.

However, if you do want to do it anyway, you should do it in stages so that your annual CGT allowance avoids you having to pay CGT. The CGT bill will be far larger than the saving by waiting to do some of it in a second year to get the second year's CGT allowance.

CGT is just too expensive compared to mortgages for it to be worth paying to get rid of a mortgage sooner.

I'm also assuming that the investment doesn't drop in value between the first and second times. If this worries you, you can protect against it by opening a short position via options, covered warrants or even spread bets.

Eagle_beak

Thanks for the advice Jamesd. To be honest, I only kind of see my shares as a bank account. I know it's really an investment but I just pay in and forget about it till I get my statement. The company put in 1/2 of what I put in so it's a really good scheme. Thought it might be better to lose about £3000 in tax as opposed to paying about £7000 in interest to mortgage, but I will take your advise