HC Deb 12 December 1979 vol 975 cc622-4W
Mr. Marlow

asked the Chancellor of the Exchequer what action he is taking to ensure that the normal tax relief is available immediately to taxpayers whose mortgage payments increase.

Mr. Winnick

asked the Chancellor of the Exchequer if he will ensure that the extra tax relief on the higher mortgage interest rates will be paid speedily; and if he will make a statement.

Mr. Peter Rees

Because of the work burden in tax offices it is not possible to adjust all PAYE codes forthwith to take account of increased mortgage interest payments. Any extra tax relief due will in general be given by way of refund after 5 April next, and tax offices will give priority to this work. However, if any taxpayer is caused hardship by this arrangement he should write to his tax office giving full information of the interest actually payable by him for the year, and his tax code will then be adjusted as a matter of urgency.

Mr. Meacher

asked the Chancellor of the Exchequer what he estimates to be the average increased cost to the borrower arising from the increase in the mortgage rate from 11¾ per cent. to 15 per cent. for mortgages of, respectively, £25,000, £30,000, £40,000, £50,000, £60,000, £75,000 and £100,000 in each case both gross and net of tax relief.

Mr. Peter Rees [pursuant to his reply, 7 December 1979, c. 402]

The net cost to the borrower of the increase in mortgage rate from 11¾ per cent. to 15 per cent. at different levels of mortgage depends on the borrower's marginal tax rate and on the remaining mortgage outstanding. For new 20-year mortgages at marginal tax rates of 30 per cent. and 75 per cent. (the top marginal rate including investment income surcharge), the figures are as follows:

Additional monthly cost after tax relief
Mortgage Additional monthly cost (a) At basic rate (b) At 75 per cent.
£ £ £ £
25,000 58.30 38.00 7.50
30,000 69.90 49.60 19.20
40,000 93.20 72.90 42.50
50,000 116.60 96.20 65.80
60,000 139.90 119.60 89.10
75,000 174.80 154.50 124.10
100,000 233.10 212.80 182.30

The tax relief is limited to the interest on £25,000 of the mortgage.

If the mortgage was near the end of its term the additional cover would be very much smaller.