Mortgage when self employed - advise please!

shomk

My husband have had a mortage for 3 years and we have had been employed and therefore had an income which could be measured and shown.

My husband has just become self employed (well he has started a limited company). We have heard its hard to determine what your income is when self employed and this question came up recently for a credit card and I didn't know what to put. It will be the same when getting our re-mortgage in a years time.

How do we know what his 'salary' is - at the moment its whatever we can get!

koexelek

Unfortunately, with a lot of lenders these days, unless you have been self employed for a least a couple of years, and have accounts from a chartered or certified accountant, you might as well be on the dole as far as proving income is concerned :eek:

shomk

Doesn't sound too good.

We would like to start a family in the not to distant future so I have been looking at how our finances would work ie tax credits etc. How would this work if we cannot prove my husbands income?

foreversummer

If you husband is the Director of a Limited Company his income will be the salary that he draws and any dividends that he pays himself.

Go and see a local Independent Financial Adviser. Ask around friends/family/work colleagues if anyone can recommend one.

Might be a bit early yet though if you have a year left on your current deal. Six months before your deal ends is normally a good time. Plus you will have a better idea of how the business is going by then.

Foreversummer

TEDDYRUKSPIN

First year will not account due to nearly all or most companies not breaking even. Second year you will start to make some money and Third will give you overall salary.

Finance companies usually take either your net profit (accounts) or your tax receipts. They usually ask for 3 years and take an average.

Your other option will be self certification.

Good luck..

koexelek

TEDDYRUKSPIN wrote: »

Your other option will be self certification.

Good luck..

Self cert with less than a years trading will be virtually impossible

blueberrypie

shomk wrote: »

Doesn't sound too good.

We would like to start a family in the not to distant future so I have been looking at how our finances would work ie tax credits etc. How would this work if we cannot prove my husbands income?

Tax credits will be based on the previous year's income; they'll be worked out based on your husband's tax returns, along with your own income. You have to inform HRMC of any substantial changes. See http://www.hmrc.gov.uk/taxcredits/questionsaboutincome.htm

Conrad

shomk

A major error is caused where your Accountants focus is at odds with yours. He tends to recommend solutions that will MINIMIZE your declared income and profits as this will minimize your Tax bill.

Problem is when you come to a get a mortgage this works against you so be sure he understands your needs up front.

One example;

He might put one of your notional expenses as 'Use of a room in your home for book keeping / admin'. This will be notarised as cost in your company accounts and will therefore reduce your profit even though in reality the use of a room at home incurrs no actual real cost.

koexelek

Conrad wrote: »

shomk

A major error is caused where your Accountants focus is at odds with yours. He tends to recommend solutions that will MINIMIZE your declared income and profits as this will minimize your Tax bill.

Problem is when you come to a get a mortgage this works against you so be sure he understands your needs up front.

Yes, a good accountant is good at helping you fiddle your tax bill ( though in a totally above board way) but bad at giving you figures a mortgage lender needs.