You are here: Home - Mortgages -

The extra 1.3m Brits to pay 40% tax by 2014 could save through an offset mortgage

Written by:
An extra 1.3m Brits will pay 40% tax by 2014 but can save an up to £36,600 with an offset mortgage, according to first direct.

First Direct has calculated that they could save nearly £36,600 each if they used the tax efficient benefits of an offset mortgage.

Estimates from the Institute of Fiscal Studies (IFS) show that, based on the recent changes to income tax thresholds and predicted wage inflation, 15% of UK taxpayers will fall into the 40% tax bracket within the next 18 months.

First Direct has calculated that a 40% tax payer with an average £183,532 mortgage and typical cash savings of £36,706 could save £36,570 in interest costs over the term of their mortgage with an offset versus a normal repayment style mortgage.

Ian Bartholomew, senior mortgage manager at First Direct, commented: “Offset mortgages used to be seen as complicated and when they were launched in the 1990s, only 5% of Britons found themselves in the higher rate income tax bracket and able to benefit from the tax efficiency an offset mortgage offers.

“Since then a lot has changed; more people that ever sit in the 40% tax bracket; instant access savings interest rates have fallen considerably; and the advantages of an offset are easier for homeowners to understand.

“It’s worth remembering that many people could be better off with an offset mortgage, even though the rewards are greater the higher the tax bracket. Any mortgage holder with savings should bear in mind the benefits of offsetting.”

Tag Box




Financial fitness

There are 0 Comment(s)

If you wish to comment without signing in, click your cursor in the top box and tick the 'Sign in as a guest' box at the bottom.

Are you a first-time buyer looking for a mortgage?

Look no further, get the help you need by searching for your perfect mortgage

Five ways to get on the property ladder without the Bank of Mum and Dad

A report suggests the Bank of Mum and Dad is running low on funds. Fortunately, there are other options for st...

The essential Your Money guide to the April 2018 tax changes

As we head into the 2018/19 tax year, a number of key changes take place to existing policies while some new i...

A guide to switching energy provider

All you need to know about switching from one energy supplier to another.

What will happen if rates change

How your finances will be impacted by a rise in interest rates.

Regular Savings Calculator

Small regular contributions can build up nicely over time.

Online Savings Calculator

Work out how your online savings can build over time.

Having a baby and your finances: seven top tips

We’re guessing the Duchess of Cambridge won’t be fretting about maternity pay or whether she’ll still be...

Protecting family wealth: 10 tips for cutting inheritance tax

Inheritance tax - sometimes known as 'death tax' - can cause even more heartache for bereaved families. But th...

Travel insurance: Five tips to ensure a successful claim

Ahead of your summer holiday, it’s important to make sure you have the right level of travel cover or you co... Awards 2018

Now in their 21st year, our awards recognise the companies offering the best products and services to consumers

Money Tips of the Week

Read previous post:
Three things we learned this week

Retirement Planner's round-up of the top pension stories this week.