True Self cert mortgages ... help!

payless

MortgageMamma wrote:

with respect, as a self employed person there are certain things you can write off. an accountant did my returns so im quite sure its all above board.

For example, when I did self assessment things like petrol, phone expenses etc were all taken off earnings before tax calculation

but if they lender asks for taxable income or net profit, you have to quote the bottom line, not the pre expenses figure

silvercar

Timmne wrote:

With respect; you were therefore making your own rules up and evading tax?

If the OP is an honest person and declares his earnings, he should surely be fine using my original suggestion.

Ridiculous statement, tax regime for self employed people is totally different to PAYE. This is why brokers have tables showing comparable PAYE salaries for the self-employed.

If you have a company and keep the money in the company until such a time as you need it eg to fund a house purchase, the money never shows on tax returns or personal accounts. If in future years you need to draw a higher salary, to fund a larger mortgage you are in a position to pay yourself a higher salary. This is one of the reasons why self-cert exists.

I suggest OP sees a mortgage advisor who has experience of this.

MortgageMamma

Thank you silvercar. The reason, as a self employed person I asked an accountant to do my assessment was because I wanted to minimise the amount of tax I paid. All quite legal and strictly above board! Is very common with self employed people. However I've just set up a limited company and have employed myself, so now I am on PAYE and dealing with corporation tax - which I'm not too hot on to be honest so all that has been given to the accountant as well. I'm a great believer in using subject experts I find it most beneficial!

Timmne

MortgageMamma wrote:

with respect, as a self employed person there are certain things you can write off. an accountant did my returns so im quite sure its all above board. its a fact, if theres an allowance available to you, you take full advantage of it. Accusing me of tax evasion is really quite assumptive, especially since you know nothing of me or my businesses.

I agree you can claim things against your business; I'm an accountant!!

Obviously our wires have become crossed and I apologise if so.

The point I'm trying to get to (without making accusations!) is that a tax return can not be mistrusted by a lender - a tax payer will never overstate their taxable income for the year, which means that whatever income is declared, the mortgage lender should agree with and lend upon.

So - if the OP has filed tax returns and has been honest about what's included in them, surely they should be regarded as quality information?

MortgageMamma

Timmne wrote:

I agree you can claim things against your business; I'm an accountant!!

Obviously our wires have become crossed and I apologise if so.

The point I'm trying to get to (without making accusations!) is that a tax return can not be mistrusted by a lender - a tax payer will never overstate their taxable income for the year, which means that whatever income is declared, the mortgage lender should agree with and lend upon.

So - if the OP has filed tax returns and has been honest about what's included in them, surely they should be regarded as quality information?

Hi Timmne - obviously we have had a slight misunderstanding, I've read back on my post now and I can see why you would have thought that so I do apologise!

Yes, lenders do take take returns as good information. Formal accounts are favoured a bit more IMO, but not everyone has the ability to pay an accountant. I'd be stuffed without mine !

newtothis_4

I dont understand you lot - Richyleek asks for some help and advice and reading through this thread its turned into an argument about tax evasion - if you want to help the guy out - just answer his question please. You can carry on your debate elsewhere surely!

MortgageMamma

The truth is, we are unable to answer the clients question, as we are unable to assess his circumstances therefore could misguide him- I think as much guidance as is possible given the information provided has been posted

payless

silvercar wrote:

Ridiculous statement, tax regime for self employed people is totally different to PAYE. This is why brokers have tables showing comparable PAYE salaries for the self-employed.

If you have a company and keep the money in the company until such a time as you need it eg to fund a house purchase, the money never shows on tax returns or personal accounts. If in future years you need to draw a higher salary, to fund a larger mortgage you are in a position to pay yourself a higher salary. This is one of the reasons why self-cert exists..

silvercar you are mixing up company owners ( ie Ltd) and self employed

the former may well leave funds in the company and extract in various ways (salary/ divs) at various times to suit ( although company is taxed for the appropriate period anyway) BUT for self employed the net profit is shown on accounts ( and used for mortgage applications if asked ) - whether drawn ( shown as drawings) or not.

possible a few small differences based on the way depreciation can differ from capital allowances , and other provisions

I suggest OP sees a mortgage advisor who has experience of this

Some advisers think they have experience.. but with the route you mention might in fact be leading an applicant to make misleading declaration.

AndrewSmith

Not my own words so don't jump all over me if you don't agree or don't like what I say

The stance from a compliance point of view is that if the individual is self employed then it is the 'net profit' (pre-tax) figure from the tax return that must be used on a self certify declaration.

If no self assesment return exists (not long enough trading etc) then it is reasonable to make an estimation of the 'net profit' based on the firms cashflow forecasts, business plan and financial projections, along with current trading history, however this must be reasonable and justifiable should it be necessary. It is not a license to print money.

For directors or owners of LTD co's it is again the income tht is declared on th inland revenue self assesment return that is used, as this will include all payments made such a dividends etc.

Some compliance departments insist that the broker has a duty of care to report any suspected tax evasion.

ollyk

richyleek wrote:

The price is £124,950
It is ex-council
my income is now £24,000
and my wifes is £11,000
i have been self employed for 5 years, but my income has increased in the last year by about £10,000.

Do you honestly believe you can afford this on your salaries?