Tax reserves you must keep
Money set aside for a January or July tax payment still earns its keep while it waits, if you know where to put it.
Offset, overpay or save — see it on your own numbers
This works out offsetting, overpaying and saving side by side, using your own mortgage balance and cash. It's built for anyone holding money next to a mortgage, particularly the self-employed setting aside tax for January and July. The guide to offset, overpay or save sets out how each option works; the calculator further down turns that into your own figures.
Use the calculatorThe pieces behind the comparison
Each card leads to a specific question about offsetting, overpaying or saving, from tax reserves to deposit protection to which lenders offer it.
Why offset rates run higher
An offset deal usually costs more than the same lender's ordinary rate, so the comparison only works lender against lender.
Deposit protection on offset savings
If a lender fails, offset savings are protected as deposits up to the FSCS limit.
Check deposit protection →Lenders offering offset mortgages
A reference list of UK lenders with offset products lets you check who offers one before you speak to an adviser.
Guide to offset, overpay or save
Read how each strategy works before you run your own mortgage balance, cash and tax band through the calculator.
Read the guide →What this site does
A calculation that runs in your browser on your own figures, with nothing you enter stored or sent anywhere.
Read more about the site →
The mechanism
Offset cash earns no interest, so there's nothing to tax
Offsetting changes how much interest the mortgage charges each day. Here's what happens underneath, step by step. The guide to offset, overpay or save sets out how each option compares before you run the numbers in the calculator below.
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Your cash sits beside the mortgage
An offset mortgage holds your savings balance in an account linked to the mortgage. The money stays visible and separate, and in most cases you can still withdraw it.
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Interest is worked out on what's left after offsetting
Each day, the lender calculates interest on the mortgage balance minus whatever cash sits in the linked account at that moment. Add more to the account and the interest charged that day falls; take money out and it rises again.
Check your own mortgage terms for how often the balance is recalculated and which accounts count towards the offset.
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The saving never passes through your hands as interest
You don't receive interest on the offset cash itself. What happens instead is that the mortgage charges you less, day by day, for as long as the balance sits there.
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With nothing received, there's nothing for income tax to catch
Income tax is charged on interest received, under ITTOIA 2005 s369 (read 3 October 2026). Offset cash earns no interest of its own, so there's no sum for that section to apply to.
What the statute saysITTOIA 2005 s369 charges income tax on interest received, read 3 October 2026.
What hasn't been publishedNo HMRC page addresses offset mortgages directly, so this position is reasoned from the statute.
This sets out how a standard offset arrangement works. Your own mortgage terms govern how interest is calculated and which balances are included, so check them before relying on the figures.
The savings tax rise, set against an allowance that has not moved
The Personal Savings Allowance decides how much savings interest you keep before any of it is added to your income tax. GOV.UK sets the allowance at £1,000 for basic rate taxpayers, £500 for higher rate taxpayers and £0 for additional rate taxpayers, read 3 October 2026.
- Basic rate taxpayer: £1,000 of savings interest a year before tax applies
- Higher rate taxpayer: £500
- Additional rate taxpayer: £0, so interest is taxed from the first pound
That allowance has not moved. What has moved is the rate charged on interest above it. From April 2027, interest over your allowance is taxed at 22, 42 or 47 per cent, depending on your band, under Finance Act 2026 s5, read 3 October 2026.
What a fixed allowance against a rising rate does to your result
A fixed allowance set against a rising rate means the same savings balance keeps less of its interest after tax than it did before April 2027. The balance has not changed, and the rate the bank pays on it may not have changed either. What changes is how much of that interest you keep, once the amount above your allowance is taxed at the new rate for your band.
Offsetting and overpaying are not touched by this change, because neither produces interest for you to be taxed on. You can read the mechanism behind that on how offsetting works, and why there is no tax to pay. The savings option is the only one of the three where this shift lands.
Which lenders offer an offset mortgage
Before you take an offset rate to the calculator, it helps to know which lenders offer the product at all. This lists them with the source checked and the date it was read, in no particular order and with no rates or fees attached. The guide to offset, overpay or save sets out how each strategy works, and the calculator takes those figures and applies them to your own balance.
MBS Lending
A UK specialist mortgage provider lending to borrowers with poor credit records, operating exclusively through professional brokers.
Foundation Home Loans
A UK specialist mortgage lender offering tiered residential mortgage products for borrowers with adverse credit, available only through professional brokers.
Vida Homeloans
A UK specialist mortgage lender offering residential mortgage products with flexible lending criteria under a tiered Credit Repair range.
United Trust Bank
A UK bank offering specialist mortgage products through registered intermediaries, including debt consolidation mortgages for borrowers with adverse credit.
Mansfield Building Society
A UK building society offering a range of residential and buy-to-let mortgage products including specialist Versatility and Credit Repair ranges for borrowers with adverse credit.
Pepper Money
A specialist UK mortgage lender offering products for borrowers in complex or adverse credit situations, available only through authorised professional brokers.
Kensington Mortgages
A specialist UK mortgage lender providing lending for complex situations, operating only through brokers.
Bluestone Mortgages
A specialist UK mortgage lender focusing on bad credit mortgages, using a tailored approach that does not rely on credit scoring.
Family Building Society National Counties Building Society
A UK building society offering buy-to-let mortgages for individuals, limited companies, expats, and HMO landlords.
Santander UK
One of the seven largest UK lenders active in the buy-to-let mortgage market.
- Lender type one of the seven largest UK lenders source
Virgin Money Nationwide Building Society
One of the seven largest UK lenders active in the buy-to-let mortgage market.
Put your own figures through it
Enter your mortgage balance, the cash you hold, your tax band and any amount that has to leave on a set date, and see offsetting, overpaying and saving set out side by side. A guide to how each option works sits alongside the calculator, for anyone who wants to read through the mechanics first.