Benefit in Kind Mortgage Rate

mgreen1001

Hi, we are taking out a mortgage through my wife's employer and have decided to take a staff rate for which she will incur a tax penalty.

What I would like to know is how to calcualte the likelly monthly amount of this extra tax.

The mortgage rate we have been offered is 5.49 fixed for £151,000, and her salary s £11,900 a year?

Any ideas?

Thanks

maninthestreet

It will be whatever the taxable benefit is deemed to be, taxed at you wife's marginal tax rate (20%).

mgreen1001

well im guessing it wont be a substantial amount per month

mgreen1001

ok just checked the rate offered to the public on the same deal is 6.79 - about £129 difference a month.

maninthestreet

£129 per month = £1548 per year. At 20% tax rate, that's £309.60 per year tax, or £25.80 per month.

silvercar

The taxable benefit will be the difference between the rate you are paying on the staff deal and the rate that the inland revenue deem to be the notional rate of interest for this purpose, it is nothing to do with the non-staff rate.

For this reason it is important to calculate whether the tax paid and the lower rate are beneficial. The deemed rate is often higher than you could get on a non-staff deal.