Offset Mortgage Calculator UK
See how much interest your savings save when offset against your mortgage, how much sooner you could be mortgage-free, and whether it beats an easy-access savings account after tax.
Last updated: October 2026 · 2026/27 tax rates
Mortgage
Savings
Interest saved over the mortgage
£50,438
Mortgage-free 3 years 9 months sooner, keeping your £1,111.66 payment.
Normal mortgage vs offset
| Normal | Offset | |
|---|---|---|
| First monthly payment | £1,111.66 | £1,111.66 |
| Total interest | £133,499 | £83,062 |
| Term | 25y 0m | 21y 3m |
| Interest saved in year one | £1,378.19 |
Offset or savings account?
Offset savings earn no interest, so there is nothing to tax. To match a 4.5% offset, a taxable account would need to pay:
| Taxpayer | Tax on savings | Equivalent gross rate |
|---|---|---|
| Basic rate | 20% | 5.63% |
| Higher rate | 40% | 7.50% |
| Additional rate | 45% | 8.18% |
Offset, year one
£1,378.19
interest not charged, tax-free
Savings account at 4%, year one
£1,160.00
£1,200.00 interest less £40.00 tax (basic rate)
Offsetting comes out £218.19 ahead in year one.
How it works
An offset mortgage links your savings to your mortgage. Instead of earning interest, the savings reduce the balance the lender charges interest on. With a £200,000 mortgage and £30,000 offset, you pay interest each month on £170,000, while still being able to withdraw the savings.
The calculator runs the mortgage month by month at the annual rate divided by 12. You choose what happens to the interest saved:
- Reduce the term. You keep paying the normal amount, so more of each payment clears capital. £200,000 at 4.5% over 25 years with £30,000 offset saves £50,438 of interest and finishes 3 years 9 months early.
- Reduce the payment. Capital is repaid on the normal schedule and you just pay less interest. The first payment falls by £112.50 a month (£30,000 × 4.5% ÷ 12), saving £32,231 over the term with the same end date.
Adding to the savings every month helps more. Putting in an extra £200 a month on top of the £30,000 lifts the saving to £70,259 and cuts 5 years 3 months off the term.
Money in an offset account earns no interest, so there is no interest to tax. The return is the mortgage interest you avoid. To compare it with a normal savings account, gross the mortgage rate up for the tax you would pay on savings interest: equivalent gross rate = mortgage rate ÷ (1 − your tax rate).
In 2026/27, savings interest above your allowances is taxed at 20%, 40% or 45%. A 4.5% offset is therefore worth the same as 5.63% gross to a basic-rate taxpayer, 7.50% to a higher-rate taxpayer and 8.18% to an additional-rate taxpayer.
The grossed-up rate only applies to interest above your Personal Savings Allowance: £1,000 a year for basic-rate taxpayers, £500 for higher-rate and £0 for additional-rate. A basic-rate saver whose interest stays within £1,000 pays no tax on it, so the fair comparison is the plain mortgage rate against the plain savings rate. The year-one comparison above applies the allowance for your band, assuming no other savings interest uses it (ISA interest is tax-free and does not count towards it). A higher-rate taxpayer with £30,000 at 4% would earn £1,200.00 and keep £920.00 after tax. Read more in our guide to tax on savings interest.
From April 2027 the savings income tax rates are due to rise to 22%, 42% and 47%, which makes offsetting slightly more valuable.
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Reviewed by Alexandre Bernier, LLM (UK), CFP®
Educational tool: estimates only. Not individual financial, investment, tax or legal advice. Using it does not create an adviser-client relationship. Rules and figures change; check them against current HMRC and GOV.UK guidance and speak to a qualified professional. Editorial policy →
Sources
Every rate and threshold used by this calculator is taken from the official pages below. If a figure here disagrees with one of these, the official page is right, please tell us.