Sunday 22 October 2017

Home Economics: Answering your property questions

Moving off a tracker would cost more
Moving off a tracker would cost more
Sinead Ryan

Sinead Ryan

Personal Finance expert Sinead Ryan answers your property questions.

Q. I have been offered a transfer to Northern Ireland with my company, paid in sterling. I live in Drogheda and don't really want to move. What are the tax implications if I take the job and remain living in Drogheda? Would it make sense to rent there or does it make a difference?

Sinead replies: You have lots to consider. I'm sure you've already factored in the commute, for instance, and you'll have less free time too. Without knowing the actual salaries, it's difficult to compare, but with Brexit looming, there may be implications about you working in a non-EU country.

I asked tax expert Barry Flanagan of Taxback.com for his thoughts: "Assuming you remain resident and domiciled in Ireland, you will be taxed in Ireland on your worldwide income, including income from this position, regardless of whether you retain your Irish employment or switch to a UK contract.

"As you would be performing all employment duties in the North, this income would also be taxable there, so a case of double tax could potentially arise. However, various forms of relief would be available, if so. You may be eligible for Cross Border Relief, as an individual who is resident in Ireland and commutes to his/her place of work abroad and who pays tax in the other country on the income from that employment. Conditions include:

* employment must be exercised wholly in a country with which Ireland has a Double Taxation Agreement - Ireland and UK have;

* employment must be held for a continuous period of at least 13 weeks in the tax year;

* income from this employment must be subject to tax in the other country and this tax must actually have been paid to the relevant authorities and not be eligible for a refund;

* for every week the individual works abroad, he/she must be present in the Irish State for at least one day in that week.

"Renting accommodation in the North would not affect your tax status provided you spend at least one night per week south of the border. If you only have employment income, then it is likely you will have no Irish liability. Alternatively, relief could be available through claiming a foreign tax credit in Ireland for the tax paid in the UK. As tax is slightly lower in the UK, there would be some additional liability due here, bringing you up to the 'normal' Irish effective tax rate."

Q. We have an old tracker mortgage with Ulster Bank with €90,000 remaining on it. In order to avail of the particular tracker rate, we are obliged to use an Ulster Bank UFirst current account that costs €10 per month. If we switch to another account, the mortgage rate goes up. We didn't really think about it when interest rates were much higher, but it turns out that the €120pa represents a significant proportion of the total interest paid each year. Would we be better off switching?

A. Ulster Bank's normal current account flat fee is €4 per month, which is reasonably competitive compared to its competitors, so you'd be paying that in any event.

Switching off a tracker is a big no-no, so I'm assuming you mean whether it's worthwhile to switch to another current account within Ulster Bank and if that would allow you maintain your current tracker, albeit at a higher rate.

A spokesperson from the bank told me: "A customer would no longer be eligible for the UFirst mortgage if they no longer had their UFirst account. Should they still wish to move away from their UFirst account, they would be able to switch to any of our other mortgage products on offer, subject to the usual terms and conditions, affordability and lending criteria.

"We offer transaction-free banking for all current accounts and charge a €4 monthly maintenance fee. The monthly maintenance fee for the UFirst current account (which is no longer on sale) is €10."

My advice is to stay put. You're paying an extra €72pa at most, but you'd have to move to a variable rate mortgage to save that as trackers are no longer sold, which would end up costing you far more.

The Ryan Review

We've come a long way from the guy on the bus who didn't know what a tracker mortgage was. Money buyers are very savvy now and there's no doubt, that while we're slow to switch banks, when it comes to home-loan borrowing, we do our homework.

The final year figures from the Central bank show that mortgage lending is at a high. For the first time in seven years, more was borrowed than paid off home loans.

This reflects the improved economy and will increase as the taxpayer-funded supports to first-time buyers kick in.

But the more interesting detail was that the majority of borrowers were plumping for fixed-rate loans, instead of variable. With ECB rates at an all time low, banks are factoring in no change for the foreseeable future and are prepared to offer attractive lock-ins for new customers.

Bank of Ireland's snub to Finance Minister Michael Noonan in refusing to drop its variable rates now looks like a smart move for the lender - it cut its fixed rate offerings to lure in customers and, along with its 2pc cash-back deal (plus a further 1pc after five years), makes it attractive for newbies.

Its fixed rates start at just 3.1pc, while the variable is stubbornly high at around 4.2pc.

As competition heats up this year, watch the fixed-rate space.

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