What counts as "income" for credit card applications for a company director

T-b-P · 18 November 2017 at 2:48AM

How does it wok for someone working through a company as director and 100% shareholder?
Using these figures as an example:

Company turnover £55K
Salary taken £10K
Other expenses £5K
Pre-tax Profits £40K
Dividends £15K

I know for mortgage purposes I'm treated as "self employed" and some lenders will accept the amount drawn as salary plus the company's pre-tax profits as "earnings" (ie. £50K in these figures). I'm not sure if it works the same for credit card applications or if it would only be the amounts drawn of £25K in this case (salary+dividends)?

Ben8282 · 18 November 2017 at 7:26AM

I have two answers.

The first is to use whatever figure you entered on your latest tax return (ie the amount that you paid tax on).

My second answer is that you should show yourself as employed entering your salary plus the dividends, assuming that the dividends are expected to be paid regularly and are not a one-off. You cannot use the pre-tax profit figure as your income. If you wish to increase your income for this purpose, increase your salary and/or your regular dividends.

chattychappy · 18 November 2017 at 10:58AM

It is your income, not the company's. The company is a separate legal person.

So the answer is salary + dividends, ie £25K.

I feel you shouldn't use what went on your tax return, because that is rather out of date.

Whatever you put down, keep a note and ensure future CC applications are consistant.

jonesMUFCforever · 18 November 2017 at 3:03PM

...........But if you have a bad year then your income will probably reduce to enable you to keep the dividend at the current rate (favorable tax treatment) so IMO income is salary.

OP no mention in your post of net profits - do you take it all out?

Kim_13 · 18 November 2017 at 5:00PM

I'd have said 25K also.

Putting salary only, at 10K is likely to rule you out of obtaining some cards.

Future applications should be consistent, but of course income can change. As long as you can prove whatever you put down you can't be guilty of any fraud.

What you cannot do is put down the company's turnover or profit - as another poster said, a limited company is a separate legal entity from you.

Expenses also shouldn't be put down - it is not money earned but money reimbursed. Including it could amount to deception.

Potbellypig · 19 November 2017 at 9:02PM

T-b-P wrote: »

How does it wok for someone working through a company as director and 100% shareholder?
Using these figures as an example:

Company turnover £55K
Salary taken £10K
Other expenses £5K
Pre-tax Profits £40K
Dividends £15K

I know for mortgage purposes I'm treated as "self employed" and some lenders will accept the amount drawn as salary plus the company's pre-tax profits as "earnings" (ie. £50K in these figures). I'm not sure if it works the same for credit card applications or if it would only be the amounts drawn of £25K in this case (salary+dividends)?

Similar situation here. I've put salary and dividends and never had any issues.

indierocker85 · 21 November 2017 at 10:27PM

T-b-P wrote: »

How does it wok for someone working through a company as director and 100% shareholder?
Using these figures as an example:

Company turnover £55K
Salary taken £10K
Other expenses £5K
Pre-tax Profits £40K
Dividends £15K

I know for mortgage purposes I'm treated as "self employed" and some lenders will accept the amount drawn as salary plus the company's pre-tax profits as "earnings" (ie. £50K in these figures). I'm not sure if it works the same for credit card applications or if it would only be the amounts drawn of £25K in this case (salary+dividends)?

Best bet is to ask accountant, but I believe for personal applications they look at personal income, which in this case, would be £25k, made up of your salary and dividends.

owen86 · 4 December 2017 at 11:09PM

I'm in a similar position but 50% shareholder. I have generally entered take home salary + dividends for the year. I do wonder if I should state salary before or after tax though?

chattychappy · 4 December 2017 at 11:39PM

owen86 wrote: »

I'm in a similar position but 50% shareholder. I have generally entered take home salary + dividends for the year. I do wonder if I should state salary before or after tax though?

For salary, income is usually stated as before tax.

In the case of dividends, I would put down what you receive. Of course this is effectively after some tax has been deducted, but in this case the tax liability is on the company, not on you. (Though of course there may well be further dividend tax to pay.)

Abbey1991 · 5 December 2017 at 12:00AM

T-b-P wrote: »

I know for mortgage purposes I'm treated as "self employed" and some lenders will accept the amount drawn as salary plus the company's pre-tax profits as "earnings" (ie. £50K in these figures). I'm not sure if it works the same for credit card applications or if it would only be the amounts drawn of £25K in this case (salary+dividends)?

Effectively you earn a £55k gross salary in a more tax-efficient structure than PAYE.

So it is reasonable to put down £55k in answer to the income question on a vaguely worded credit card application.

Chrysalis · 5 December 2017 at 7:44AM

Income would be what you personally get from the company, not the company income.

What counts as "income" for credit card applications for a company director

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