THE golden rule in repaying a mortgage loan, at least as far as British tax is concerned, is that you only get one bite at the cherry. The general point, therefore, is that because mortgage interest is potentially tax deductible you should get the biggest mortgage you can afford, or that you are allowed. S. W. asks what type of mortgage would be best: Repayment mortgage, with which interest and capital payments are mixed in a single payment to the lending bank; Savings Plan plus interest, where the lending bank only receives the interest on the outstanding loan and provisions for repayment of capital are handled through a separate repayment mechanism. This can be through a savings plan, a pension scheme, or anendowment. The unequivocal answer to S W's question is a definite maybe! This is because the kind of mortgage you should get depends on your personal circumstances. If you want to buy property for the short term, say two to three years and then selling, you would generally be better off going for a repayment mortgage. This isbecause cashing in your mortgage early will result in a small encashment value. However, because the savings plan is simply assigned to the bank, you can keep it going and assign it against your next loan. With a repayment mortgage, the lender uses the payment in the early years to pay the interest and only a tiny part to pay off the capital. Later, the interest proportion is reduced, just at the time when the rent is increasing; it thereby gives rise to apotential tax burden. Generally, using a separate repayment vehicle allows the interest proportion of the funding to remain constant while the savings plan does the job of repaying the capital. This happens when the plan matures or, alternatively, when the property is sold and the loan repaid. The savings programme in the this example is given back to the investor to hold in his own name; this could be a useful savings plan, perhaps for your retirement or some other specific expense. D. P. asks if he should open a savings plan registered in a tax haven, such as the Isle of Man or Guernsey, or a British onshore endowment plan? Again, the answer depends on your personal circumstances. An offshore tax haven plan will enjoy tax free growth, which is of substantial benefit over the years. An onshore plan, as its name suggests, is issued from an onshore British company and will not grow as efficiently, because each year you will have to pay tax on profits. This can make a tremendous difference over a period of 10 years or more. Some may argue that onshore performance is much better than that achieved by fund managers offshore, even after tax has been paid. This is hard to accept because some companies, Royal Life, Sun Alliance and Royal Skandia for example, offer many fund managers to choose from. The only argument in favour of using an onshore savings plan is if you soon intend to return to Britain for good. The tax you pay on growth would then be compensated by the final payout in the form of a tax free lump sum. An offshore plan, if cashed-in while you are a tax resident in Britain, would be liable for tax on profits and the amount would be reduced pro rata, according to the time you spent abroad while holding the plan. So, it may pay to start the savings plan early. D. M. asks where do Hong Kong residents fit into the rule that all Commonwealth citizens are allowed to claim a zero per cent allowance? The answer is that Hong Kong citizens buying property in Britain are treated in the same category as non-resident Britons, Australians, Canadians and other Commonwealth nationals. D. M. also asks exactly what a zero per cent allowance is. Briefly, the way income tax works is that all rents from Britain are liable to British income tax. You can offset certain expenses against tax, as detailed before, but all remaining income will be liable to tax. The rate depends on how much income there is. Some will be taxed at zero per cent (this is the zero per cent allowance group) some at 20 per cent, some at 25 per cent and the rest at 40 per cent. To emphasise the importance of tax planning, Britain has had a highest rate of income tax of 83 per cent! J. C. asks if he should use an offshore company to buy a British property? There are a number of potential advantages and disadvantages. There are three major taxes to look at in this respect: income tax, capital gains tax and inheritance tax. Using a company rather than an individual to buy property has the disadvantage that you cannot use the personal allowances; as far as capital gains tax is concerned, if you get good advice you should be able to minimise tax on profits. Inheritance tax, however, will be payable if you buy property in your own name. However, if you are ''non-domiciled'' in Britain and die while owning a property there, your estate will be liable for tax of 40 per cent - but only if the value of your property is greater than the allowances permitted. If you have any queries or practices you wish to have answered or investigated, please contact me confidentially by facsimile on 565-1423. This is because whatever your domicile status, if you have assets in Britain they are brought inside the British Inheritance tax net. However, if your assets are owned by an offshore company and you only have shares in that company, there should be no inheritance tax.