Allow people to pay their mortgage through salary sacrifice

The Government should allow all mortgage contributions towards an individual's main residence / family home to be made through salary sacrifice, prior to tax and national insurance deductions (similar to pension contributions).

This would allow more people to become mortgage free sooner in life and put more towards their and their children's future. It could also help divorced couples, where people are having to start life all over again, on their own, at a late age. The rising cost of living and house prices makes paying off a mortgage extremely challenging for many people.

The value of the mortgage that people could pay off using salary sacrifice could be capped, so that it only benefited those who are in need.

The government remains committed to managing the public finances in a disciplined and responsible way by targeting support where it is most needed, and the government is committed to a fair tax system.

The government does not believe that allowing tax-advantaged salary-sacrifice schemes for mortgage costs in the most effective way to target support to those who need it most. The tax relief would be of greater benefit to those paying higher rates of tax with the most expensive properties and would only benefit those in employment. A new relief would have to be paid for, at least in part, by increased taxes for other taxpayers or reducing expenditure on public services

The government recognises the challenges facing households due to elevated costs of living and acted at Spring Budget 2023 to go further to protect struggling families. This includes ending the premium paid by over 4 million households using prepayment meters across the UK, introducing 30 hours of free childcare per week for working parents with children aged 9 months up to 3 years in England alongside a substantial uplift to the hourly rate paid to providers and market reforms, cancelling the planned increase in fuel duty and keeping rates at current levels for the next 12 months.

This is in addition to uprating benefits in line with inflation and support for vulnerable households announced at the Autumn Statement 2022, which included new Cost of Living Payments in 2023-24, helping more than 8 million UK households on eligible means tested benefits, 8 million pensioner households and 6 million people across the UK on eligible disability benefits. The government also announced at the Autumn Statement 2022 additional support to help with the cost of household essentials, through the Household Support Fund in England.

Taken together, support to households to help with higher bills is worth £94 billion, or £3,300 per household on average, across 2022-23 and 2023-24. The government’s successful economic strategy will provide further help. The Bank of England forecast that inflation will fall to 5.1% by the end of 2023, before falling close to its 2% per annum target by the end of 2024.

Importantly, the pricing and availability of mortgages is a commercial decision for lenders in which the government does not seek to intervene. However, if mortgage holders do fall into financial difficulty, guidance from the Financial Conduct Authority requires firms to offer tailored support. This could include a range of measures depending on individual circumstances. The government have also introduced a number of measures aimed at helping people to avoid repossession, including Support for Mortgage Interest (SMI) loans for those in receipt of an income-related benefit, and protection in the courts through the Pre-Action Protocol, which makes it clear that repossession must always be the last resort for lenders.

This government remains committed to making the aspiration of homeownership a reality for as many households as possible and operates a range of schemes that aim to increase the supply of low-deposit mortgages for credit-worthy households, increase the availability of new housing, and stimulate economic growth. These include First Homes and Shared Ownership through the Affordable Homes Programme, as well as the Mortgage Guarantee Scheme, which is open until the end of 2023. The government also helps first-time buyers to save for a deposit through the Lifetime ISA and Help to Buy: ISA. Over 837,000 households have been helped to purchase a home since spring 2010 through Government-backed schemes.

The government keeps all aspects of the tax system under review and any decisions on future changes will be taken by the Chancellor in the context of the wider public finances.

HM Treasury