Mortgage Information - Tax Relief

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Tax Relief

Past Governments have encouraged taking out mortgages via MIRAS (Mortgage Interest Relief At Source) the giving of however this tax relief was abolished from 6th April 2000. Without tax motivation people are encouraged to pay off their mortgages as soon as possible, which has had a strong impact on the types of mortgages that are suitable, in particular Endowment mortgages that have become less popular.

Tax relief on the interest paid on a mortgage to buy your main home.

If you need to talk to some one about tax relief, whether its personal tax relief or you have set up a company and you need help, try our list of providers.

Tax relief on your Investment

Up until 1984 if an endowment mortgage was taken out, a tax relief on the amount you paid into an endowment policy was received. This tax relief was also known as Life assurance premium relief, but was abolished in 1984 for the new and modified policies. At present a Pension mortgage is the one of the policies to offer tax relief on the amount you pay each month in savings to repay the mortgage.

Tax relief on the Mortgage

Tax relief on mortgage interest has been abolished from April 2000, therefore reducing the possibility to borrow and reduces the possibility to invest the borrowed money at a profit. The table below shows how the tax relief on mortgage interest has changed over the years.

Tax Relief on Mortgage Interest
Tax year	Tax relief (available on interest on first £30,000 borrowed)	Effective cost of each £100 of gross mortgage interest if you were a:
		Basic rate tax Payer	Higher rate tax payer
1990-1	At your highest rate	£75	£60
1991-2	At the basic rate	£75	£75
1992-3	At the basic rate	£75	£75
1993-4	At the basic rate	£75	£75
1994-5	20%	£80	£80
1995-6	15%	£85	£85
1996-7	15%	£85	£85
1997-8	15%	£85	£85
1998-9	10%	£90	£90
1999-2000	10%	£90	£90
2000-2001	None	£100	£100

Inflation

Currently inflation is low and interest rates are above inflation but are at their lowest for many years. This means that currently the cost of borrowing money is a great deal cheaper than it has been over the last 20 years. During the late 1970's and early 1980's there were periods where inflation was very high and interest rates were lower than inflation, effectively people were paid to borrow, the costs of mortgages decreased along with the value of their outstanding loans.

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