Self-Employed? January is tax return time!

Jan 11, 2022

If you’re self-employed then you have until the end of January to submit your online return. It’s often this time of year that self-employed people start wondering what they might be able to borrow on a mortgage. Particularly if their tax return is better this year than last year.

We thought it would therefore be a good time to publish an article which briefly explains how mortgage lenders will interpret your income.

Sole Traders-

The majority of lenders will take the last average of the last two years net profit figure as your income. If your net profit has reduced, they’ll typically take the most recent year only.  If your most recent year is considerably higher than the year before, don’t panic! There are lenders that will take just the most recent year for their calculation, you’ll likely be able to borrow much more with these lenders. They are however off of the Highstreet and you should expect a higher interest rate as a result.

Limited company directors-

If you’re a company director or your shareholding in a limited company is greater than 25% then you will be considered Self-Employed by the majority of lenders. Again, your income is typically calculated by taking the average of the last two years where the income has been generally stable. The income that lenders consider is your salary plus your dividends, both are considered at 100% it doesn’t matter if the salary is very low and the dividends are high or vice-verse.

If you think the above means that you aren’t being treated fairly from a lending perspective then don’t worry! We have access to lenders which will use your share of the net profit in the business rather than your dividends, this can be of huge value as you may not have taken much in dividends for tax reasons or simply because you re-invested in the business.  There are mainstream lenders that can work this way so you’re still potentially looking at low rates.

What about Covid support?

SEISS – If you took a SEISS grant, then we can help. Each lender has their own policy when it comes to the use of grants so it’s important to speak to an adviser if you have needed support during the pandemic.

CBILS/Bounce-back – These loans are now better understood, and the market is generally better set up to handle enquires from businesses which have taken the loans. Generally speaking, many of our clients have taken the loan but not needed it, if this is the case then it’s not likely to have a negative impact on your ability to borrow.

If your business was impacted by the pandemic it’s essential that you speak to an adviser regarding your mortgage options.

We know this is very brief but hopefully it’s given you some confidence with your borrowing ability. Please do get in touch with us if you are self employed and have any questions at all about mortgages.

Steven Morris – Advising Director

CeMAP CeRER

 

Steve loves a complex mortgage. Most recently he has used his technical geekery to work his way up through Which? Mortgage Advisers, progressing to Senior Adviser and then Onboarding Manager. There, he was responsible for hiring, training and managing new advisers.

He also ran the monthly new starter inductions and wrote and maintained the telephony advice standards of the company. Outside of work Steve can be found coaching and being run ragged by his local under 10’s rugby team, Bristol Harlequins RFC.

Meet the rest of the Advantage Team

Why a Local Mortgage Advisor Makes All the Difference for Your Bristol Home Journey

Congratulations! You've decided to take the exciting (and sometimes daunting) step of buying a home in Bristol or the surrounding area. Whether you're a first-time buyer eager to step onto the property ladder or a seasoned mover looking for your next dream home,...

Are mortgage rates in the UK going up or coming down 2024

I thought mortgage rates were coming down in 2024, what is happening?  Let’s get a misconception out of the way early about how mortgage rates have been changing… Mortgage rates available during January 2024 were cheaper than anything else we have seen since. For...

Homeownership Made (Slightly) Easier: The New £5k Deposit Mortgage

Surprise news for first-time buyers!  Accord Mortgages and Yorkshire Building Society have launched a brand new mortgage product that lets you step onto the property ladder with a deposit of just £5,000. That's right, you can finally ditch the housemate and snag your...

UK Mortgage Rollercoaster: Rates Tumble, Yet House Prices Remain a Challenge (April 6, 2024)

MARKET WATCH! UK Mortgage Rollercoaster: Rates Tumble, Yet House Prices Remain a Challenge (April 6, 2024) This week in UK mortgages has been a tale of two trends: good news for potential borrowers with falling rates, and lingering concerns for some facing a tough...

UK Mortgage Rates: A Quick Look at the Last Week (as of March 24th, 2024)

MARKET WATCH!  UK Mortgage Rates: A Quick Look at the Last Week (as of March 24th, 2024) This week in the UK mortgage market (as of March 24, 2024), we've seen a relative pause after several weeks of steady increases in interest rates. The Bank of England (BoE)...

Help! I’m a Birmingham Midshires Residential Mortgage Customer

Birmingham Midshires Exited Direct Mortgage Market in 2011: What Existing Customers Need to Know  Important information for Birmingham Midshires mortgage holders: As of October 1, 2011, Birmingham Midshires made a significant change – they stopped offering...

February 26th 2024 mortgage news

Halifax buck the trend In a surprising move, Halifax, the UK's biggest mortgage lender, has cut its mortgage rates, going against the recent trend of lenders raising theirs. This move is seen as an attempt by Halifax to gain market share in the competitive mortgage...

February 14th 2024 mortgage news

What's in the news? February 2024   The cost of moving and stamp duty is putting millions of homeowners off of potentially downsizing. Older homeowners are unable to move to smaller properties because of the financial burden that comes with a house move, and this...

Navigating the Financial Maze of Downsizing in Retirement: What are Bridging Loans?

Retirement often marks a period of transition, a time to embrace new experiences and simplify life. Many retirees consider downsizing their homes, seeking a smaller, more manageable living space that aligns with their changing needs and lifestyle. However, the...

Mortgage rates are falling in the UK as lenders battle for business in 2024

After a gruelling two years of rising interest rates, the UK mortgage market is now seeing a price war as lenders compete for business. This is good news for borrowers, who are now finally seeing rates fall. Halifax, one of the country's biggest mortgage lenders, has...

Celebrating more 5-star reviews than any other independent broker in Bristol!

Contact us today to find out why we've received over 400 hundred 5-star Google reviews

You have Successfully Subscribed!