The Government has responded to a petition calling for a mortgage shake-up, which would allow people to pay their mortgages through salary sacrifice, describing the suggestion as ineffective.
The petition, which has so far garnered nearly 25,000 signatures, argues that a salary-sacrifice scheme for mortgage costs similar to pension contributions would “allow more people to become mortgage free sooner in life” and “put more towards their and their children’s future”.
It also suggested that the move would be positive for divorced couples, who are “having to start life all over again, on their own, at a late age”. However, it suggested the value of the mortgage that people could pay off using salary sacrifice could be “capped” so it only benefits those in need.
It added: “The rising cost of living and house prices makes paying off a mortgage extremely challenging for many people.”
After a petition reaches 10,000 responses, the Government are inclined to provide a response, which it did on June 7.
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The statement reads: “The Government currently has no plans to allow tax-advantaged salary-sacrifice schemes for mortgage costs as this is not the most effective way to target support to those who need it most.”
The petition will remain open until August 28, 2023, and if it reaches 100,000 signatures, the topic will be considered for a debate in parliament.
Some still argue there is still merit in the mortgage salary sacrifice suggestion. Nicholas Mendes, mortgage technical manager at John Charcol described it as “a shining light and welcomed”.
Mr Mendes said: “Many households feel that their income is being stretched beyond imagination, food inflation, higher energy costs, wages not keeping in line with inflation along with higher mortgage rates. It’s no surprise to hear people are feeling poorer and having less disposable income compared to two years ago.”
He added that this is compounded by recent tax changes, that will impact millions more in the years to come.
Mr Mendes said: “7.8 million people are projected to be paying income tax at 40 percent or above by 2027/28, resulting in 2.1 million more higher rate taxpayers and 350,000 additional-rate taxpayers in five years’ time, according to the Office for Budget Responsibility (OBR).”
Mr Mendes continued: “The recent petition to allow people to pay their mortgage through salary sacrifice will be a shining light and welcomed.
“When we consider current deductible salary sacrifice schemes, such as medical benefits, cycle to work scheme, pension contributions and car finance can all be used, considering most homeowners highest outgoing would be a maker step forward, reducing the tax burden many are likely to fall into in the future.
“It will be important to take into consideration the potential impacts when your taxable pay goes down, which impacts your National Insurance contributions affecting entitlements like sick pay.”
However, he noted that he “doubts” the Government would ever accept such a proposal, which “in effect” would be tax relief on a mortgage.
Do you think a salary sacrifice scheme for mortgage costs would be beneficial? Have your say in the comments.
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