Mark Harris, Director of SPF, said: “As the end of the tax year approaches, there is a lot of pressure for people to put their tax affairs in order. Offset mortgages are not traditionally thought of as a tax-efficient scheme, but as these products and their advantages become better understood, we would expect them to become more popular.”
A key advantage for taxpayers is that their savings, interest on which would usually incur tax, will be offset at the mortgage rate with no tax to pay. Also, money that has been overpaid can be drawn back from the loan, a feature which can be particularly useful for those saving up to pay a tax bill in January or July.
The self-employed in particular benefit here – there is no advantage paying their tax bills early, but by putting the money directly into their mortgage they are making their money work that much harder for themselves, and when the tax bill is due they simply draw the funds from their mortgage. In the interim period they have saved themselves considerable levels of interest.
