MIRAS Calculation: Example

MIRAS Calculation: Example

MIRAS (Mortgage Interest Relief At Source) relief is provided for the first £30,000 of home loans. From April 1995, MIRAS is restricted to 15%, from April 1998 to 10%.

A basic rate tax payer is given an interest-free home loan of £30,000. Tax liability for 1997/1998 is calculated as follows:

Interest saved 7% (official rate) x 30,000	=	2100.00
Tax due at 23% x 2100	=	483.00
Less mortgage tax relief 15% x 2100	=	315.00
Tax due	=	168.00

A higher rate tax payer is given an interest-free home loan of £30,000. Tax liability for 1997/1998 is calculated as follows:

Interest saved 7% (official rate) x 30,000	=	2100.00
Tax due at 40% x 2100	=	840.00
Less mortgage tax relief 15% x 2100	=	315.00
Tax due	=	525.00

A basic rate tax payer is given an interest-free home loan of £40,000. Tax liability for 1997/1998 is calculated as follows:

Interest saved 7% (official rate) x 40,000	=	2800.00
Tax due at 23% x 2800	=	644.00
Less mortgage tax relief 15% x 2100 (maximum 30,000 x 7%)	=	315.00
Tax due	=	329.00