No longer self employed, how will my income be assessed?

cooliegirl

Hi

I run my own business and was a sole trader for a few years and have now gone over to being a LTD company. Thus I am no longer self employed, but employed by company.

It is a small online biz and still only 3 years old so we are still in the early stages. The business is doing good, and is starting to show a small profit which should hopefully continue.

I am paying myself a small wage at present plus getting some tax credits as the business cannot really afford to pay me much more right now. The business owes me quite a bit of money so I can top up my income when i need to through dividends and when the business can afford to pay me.

Previously, before I met my husband, I remortgaged my home on a self cert basis. So how would a new, joint mortgage be assessed? My husband works full time and we would like to buy a bigger home soon and maybe sell my house. There is at least 50k equity in my property currently, maybe more, but I am worried that we will not be able to get a decent mortgage with my income being what it is.

We are not planning on moving for at least a year (or two), so my income will probably change, but where would I stand if my situation did not change?

Hope this all makes sense!

Thanks
Sam

Conrad

As a rough guide, something like 4 x his gross income + 1 of yours with your income based on that shown in your accounts. Some lenders take net profit (after ALL costs) plus salary, others look at dividends.

Your income should show a rising or stable trend and lenders do not like sudden increases in income in the most recent year as this leads them to conclude it's 'massaged' for the mortgage, so may well instead average the last 3 years.

Be aware some people tell others that a director is an employee but this is 100% not the how lenders see it, they will always treat you as self employed regardless of your strict inland revenue definition.

When you hear Vince Cable applauding the return to cautious lending, remember that his joy means it's much harder for self employed folk to borrow now. He would argue it's a good thing, but he fails to understand less than 1% of people are repossessed, yet the tougher regulations keep millions of self employed people out of the market even though the vast bulk of them in the past would not have got into arrears.

cooliegirl

Conrad wrote: »

As a rough guide, something like 4 x his gross income + 1 of yours with your income based on that shown in your accounts. Some lenders take net profit (after ALL costs) plus salary, others look at dividends.

Your income should show a rising or stable trend and lenders do not like sudden increases in income in the most recent year as this leads them to conclude it's 'massaged' for the mortgage, so may well instead average the last 3 years.

Be aware some people tell others that a director is an employee but this is 100% not the how lenders see it, they will always treat you as self employed regardless of your strict inland revenue definition.

When you hear Vince Cable applauding the return to cautious lending, remember that his joy means it's much harder for self employed folk to borrow now. He would argue it's a good thing, but he fails to understand less than 1% of people are repossessed, yet the tougher regulations keep millions of self employed people out of the market even though the vast bulk of them in the past would not have got into arrears.

Only +1 on my income, that seems unfair. Is that really the case?