Benefit in kind - staff mortgage

Lucy._2

Hi
I have a staff mortgage which appears on my P11D each year. Is there an easy way I can work out how much tax I have paid on this since taking it out?

Thanks! :-)

silvercar

Change in your tax code caused by this benefit x 10 x your marginal tax rate for each year you had the benefit. Should give you a rough approximation.

TrickyDicky101

If you have your P11Ds to hand this should be very easy, no?

Lotak

Lucy. wrote: »

Hi
I have a staff mortgage which appears on my P11D each year. Is there an easy way I can work out how much tax I have paid on this since taking it out?

Thanks! :-)

It goes by the official rate of interest
According to HMRC, it's currently 2.5% (which is very low, will increase next year).

It's the average value of the loan * official rate of interest (ORI) * marginal rate of tax.
If you're a 20% taxpayer its:
Loan * 2.5% * 20%
If 40% then
Loan * 2.5% * 40%
So you're paying between 0.5% to 1% of the capital balance in tax.

Of course, if you're earning just short of £100k, and the Loan x ORI takes you above £100k, then you're marginal rate will be up to 60% as your personal allowance tapers. Then it's 1.5%.

Does your employer charge you interest on the loan or is it interest free? If they charge you interest, that interest rate gets deducted from the ORI. So if they charge you (say) 1%, then the BIK becomes Loan x (2.5% - 1%) and you'll pay tax on 1.5% of the loan.

All in all, you're on a pretty good deal!

Lucy._2

I can print copies off but I wasn’t sure how to work out the tax I have paid on the mortgage since taking it out.

Lucy._2

Thank you and the hmrc official intersect rate would be different each year? I do pay interest on the mortgage but had no idea how to work out the tax I have paid (my partner put the deposit down so owns a slightly higher percentage so I want to work out how much tax I have paid as I want to change the percentage to 50/50! )
Thank you

getmore4less

given the rates on regular mortgages are often lower than 2.5% you don't actually get any benefit but pay tax as if you did.

normanna

getmore4less wrote: »

given the rates on regular mortgages are often lower than 2.5% you don't actually get any benefit but pay tax as if you did.

There is a benefit as assuming the OP is a low rate tax payer she is effectively paying 1.1% for her mortgage which beats a lot of rates.

OP you're over complicating things - you need to look at your old P11Ds and that tells you how much tax you paid on the beneficial loan and just add them up. The official HMRC loan rate doesn't change every year but it usually changes a while after a base rate change.

BoGoF

Assuming you are a basic rate taxpayer then the additional tax payable would be the taxable benefit on the P11d x 20%.

TrickyDicky101

normanna wrote: »

There is a benefit as assuming the OP is a low rate tax payer she is effectively paying 1.1% for her mortgage which beats a lot of rates.

.

How do you come to that conclusion when you don't know what rate she's paying?

Lotak

Lucy. wrote: »

Thank you and the hmrc official intersect rate would be different each year? I do pay interest on the mortgage but had no idea how to work out the tax I have paid (my partner put the deposit down so owns a slightly higher percentage so I want to work out how much tax I have paid as I want to change the percentage to 50/50! )
Thank you

https://www.gov.uk/government/publications/rates-and-allowances-beneficial-loan-arrangements-hmrc-official-rates/beneficial-loan-arrangements-hmrc-official-rates

This table shows the historical official rates of interest.
With your P60 and P11D, you'll be able to calculate how much tax you'll have paid on it historically, but it's not a basic calculation. Gotta do some maths depending on your income and the taxable value.

What rate does your employer charge you?

TrickyDicky101 wrote: »

How do you come to that conclusion when you don't know what rate she's paying?

You are right that it depends on the rate she is being charged, but it's obviously not as high as the official rate of interest.

If the average rate is 3% and she's paying tax at 20%, then a good deal would be any interest rate under 1.5% (from employer).
If she's 40% taxpayer, then any good deal would be under 1% (assuming 1.8% is a good deal at the moment).

If we assume that the term is as long as she's working for the company, anything under 2%, really, is a good deal.
Doesn't have to worry about affordability checks.
Doesn't have to worry about product fees.
Doesn't have to worry about ERCs (obviously she would if she leaves).
Doesn't really have to worry about sudden changes in interest rate (unless Brexit causes rates to skyrocket).

Paying a small premium would be a pretty good deal to never have to worry about any of that.