Mortgage payments

Produced by Tolley in association with Paul Tew

The following Employment Tax guidance note Produced by Tolley in association with Paul Tew provides comprehensive and up to date tax information covering:

  • Mortgage payments
  • Introduction
  • Employer-provided benefit
  • Reporting requirements ― who arranges the mortgage and who pays it?
  • Employer arranges mortgage and pays the provider directly
  • Employee arranges mortgage and employer pays the provider directly
  • Employee arranges mortgage and the employer reimburses the employee
  • Payment as part of relocation

Mortgage payments

Introduction

An employer may choose to pay an employee’s mortgage liability. This is generally done for one of two reasons, either:

  1. to provide a benefit to the employee

  2. as part of a relocation package

Employer-provided benefit

If an employer decides to pay a mortgage on behalf of an employee in order to provide a benefit to them, the payment should be considered to be the settlement of a pecuniary liability, ie the settlement of an employee’s personal debt and the employee benefiting from its monetary value.

Under ITEPA 2003, s 62, earnings include anything that is of money’s worth. Money’s worth is the direct value to the employee. In this instance, the employer’s payment of the mortgage is of direct monetary value to the employee in the amount of the mortgage payment.

It, therefore, follows that mortgage payments are taxable as earnings. The key thing to understand is how the payment is made and to whom it is made. It does not matter whether the employer

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