COMPLIANCE
Matthew Chin Barnes, Subject Matter Expert – Tolley’s Global Mobility: Employment Taxes, LexisNexis, looks at international payroll-linked housing models, and considers whether a similar model could be introduced to the UK * Can payroll solve the housing crisis? Lessons from global housing funds for UK payroll
C urating Tolley’s Global Mobility radically different forms worldwide. One example I’m fascinated by is how it can be sculpted around housing. At its simplest, this is the channelling of payroll deductions from employees (often matched by employers) into a dedicated housing savings pot, which workers can later draw on for home purchases or low-interest loans. In this piece, I spotlight four models – from Singapore, China, Mexico and Kenya – outlining effective practice and potential pitfalls to ask my headline question for UK payroll professionals: can payroll solve the housing crisis? Employment Tax guidance allows me to see how payroll policy takes The UK starting point At present, there’s no dedicated UK scheme which funds housing or addresses affordability directly through pay as you earn (PAYE). Aside from mortgage interest relief at source (MIRAS), which has largely been abolished since 2000, mandated Government policies to address home affordability via the tax system for buyers have historically been limited. More commonly available to UK workers are voluntary individual saving account (ISA) schemes such as the ‘lifetime’ and ‘help to buy’ ISAs (note, the latter is closed to new applicants), with Government-offered bonuses for qualifying first-time buyers. In theory, the closest payroll-enabled scheme would be save as you earn (SAYE / Sharesave). At maturity, participants can choose not to exercise their option and instead withdraw their savings in cash, which could then be used towards a home deposit. The Government’s recent Decade of Renewal 1 plan addresses homebuyers’ purchasing power indirectly, by focussing on increasing housing supply with strengthened safety regulations and providing capital programmes such as grants to housing
associations and councils. Government analysis 2 suggests an expectation that expanding stock reduces prices over time (a 1% increase in housing stock has been linked to around a 2% fall in prices). In short, the UK has no payroll-linked housing scheme, and there aren’t any on the horizon. By contrast, the following countries embed housing into payroll fabric. The first and most established example is Singapore. MIRAS was a mortgage relief policy available between 1983 and 2000; it allowed homeowners to receive mortgage interest relief directly via reduced monthly payments. Today, interest relief is only available where the property is used for business purposes or rented out. Singapore – Central Provident Fund (CPF) Singapore’s CPF is the compulsory social security savings fund, and the key payroll consideration. Unlike the UK, in Singapore, income tax for employees is assessed annually per individual rather than via PAYE. Total CPF contributions for employees aged 55 and under are 37% (20% employee, 17% employer). These are split across three accounts: l the ordinary account (OA) l special account l MediSave. The split changes with age: younger employees have a larger share directed to the OA for housing, while older employees see more directed into the special account for retirement. OA balances can be used for home purchases, subject to regulated caps. Crucially, the Singaporean Government emphasises digital transparency, enabling employees to view their balances and understand permitted uses right from the dedicated CPF mobile app 3 . This creates a direct tangible link between the individual contributing, and the amount of housing
support they can access through their CPF OA balance.
China – Housing Provident Fund (HPF) China’s HPF also mandates employer and employee contributions. However, unlike Singapore, the scheme is administered at city level. The HPF is decentralised: municipal committees and management centres run the scheme and set local contribution ratios (subject to a 5% floor and provincial approval), allowing policies to reflect local housing and wage conditions. For example, in Beijing, the employer sets a contribution rate between 5% and 12% within the city-set range approved by Beijing’s HPF authority. While in Shanghai, both employer and employee contribute at the same percentage within a narrower 5-7% band. Permissible withdrawals include buying, building or renovating, repaying mortgage principal and interest and even paying rent. Because the scheme is run at a local level, payroll teams, especially where companies operate across multiple major Chinese cities, are kept busy with tracking city-specific rates and compliance rules. Mexico – INFONAVIT Mexico funds worker housing through the Instituto del Fondo Nacional de la Vivienda para los Trabajadores (INFONAVIT). Unlike the other models, only employers pay 5% of wages into each employee’s housing sub- account. The money belongs to the worker. Workers can use the balance to make an upfront payment on an INFONAVIT mortgage (later deposits reduce the loan), to secure a bank mortgage or, if never used for housing, to transfer the money to their pension. In February 2025, the law changed 4 to let INFONAVIT set up a wholly owned company to build homes to address supply concerns. Despite legislative guardrails aimed at
Made with FlippingBook - Online magazine maker