Mortgage benefit in kind

rmayling

Hi all,

Hoping someone can help me gain an understanding of mortgage benefit in kind. I have tried to read other' posts here but I'm still not getting it.

I'm looking into getting a staff mortgage with Lloyds Banking Group - have been offered a maximum mortgage of £103,000 with them at a 0.5% interest rate.

Example:
I would like to buy a £120,000 house. I'm going to put forward £17,000 and borrow £113,000 over 25 years at 0.5%. I won't work for Lloyds for the full term so will have to remortgage when I leave however.

Using the MSE tax calculator it looks like my monthly repayments would be £365. Can someone please help me work out (explaining would be great) the benefit in kind payments each month? The official rate just now for benefit in kind iis 3%

Finally, what overall interest % rate would his equate to - so I can compare to other deals and see if non-staff mortgages can compete?

Thanks for your time,
Ronan

getmore4less

Try HMRC BIK pages that is where explanations will be.

rmayling

Thank you for replying, however I can't seem to find any explanations - many of the them are for car benefit in kind and not mortgage based.

Thrugelmir

At a 3% official interest rate. The interest would be £3,051 in year 1.

You would pay £506 at 0.5%.

The difference between the two figures is the benefit, i.e. £2,545.

At 20% tax rate you would pay an additional £509 in tax. At 40% £1,118.

rmayling

I understand I am receiving a 2.5% interest rate benefit over the official interest rate of 3% (3% - 0.5%)

2.5% of what i'm borrowing - 113,000 is (0.025 * 113,000) = £2,825

Then 20% of this - 0.2 * 2,852 = 570.40. Adding these numbers = 3395.4 = total tax over 25 year term?

Obviously the above is wrong but I'm missing something simple. Really surprised at the lack of information on this, I'm not the smartest guy in the world but not dumb either, yet I can't understand it.

Thanks for your answer

getmore4less

Try

https://www.google.co.uk/?gws_rd=ssl#q=HMRC+BIK+loans

https://www.gov.uk/hmrc-internal-manuals/employment-income-manual/eim26102

https://www.gov.uk/hmrc-internal-manuals/employment-income-manual/eim26200