Being self employed is rubbish sometimes.

jamesd

There's no harm asking NatWest what they are willing to offer. Just don't skip the broker. Do both.

Alan_M_2

fivemice wrote:

Sometimes I wonder why we ever bothered to go self employed.

My Dad has offered to be guarantor for us (or be the main applicant if they don't offer a guarantor mortgage). Found out last night that the new job he took on meant a £10K paycut :eek: so he earns £28K and not £38K like I thought. Circumstances mean we can only go for a 3 bedroom house with a decent catchment school and we're looking at £125K-£135K. Of course we could go for something cheaper but the costs in terms of education are nothing an option I'd go for and would prefer to rent.

My husband and I are self-employed and as of last year we have a taxable income of £11k (so only one years accounts and only £11k on it because we had lots of starting up costs, frustratingly we actually earned more like £36K). This tax year (ending Apr 07) we will be able to file a return of £36K profit, having earned £45K).

But as far as I know, nobody will take our one years into account, but I can't prove the second year just yet, and most places want three years accounts.

This house buying malarkey just gets more and more complicated the more we get into it.

Here endeth my whinge

The bottom line is, you only earned £11K, start up costs are actual business expenses and can't be looked at in any other way, if you start thinking "Oh well actually I'm earning close to three times that" you're going to get in trouble, because you aren't earning any more than £11K a year right now.

Really, one year into a new business isn't the time to be buying a house. Banks and Lenders in general want three years accounts for a reason, that reason being so many businesses fail within the first three years of trading, for a variety of reasons, the single biggest being cash flow. (even a very profitable business can go bust from poor cashflow).

My advice is buy nothing for three years, no houses, no cars, no expensive holidays etc.....If your business is flourishing at that point you'll be a whole better position.

Out of curiosity what do you do that you're making an income of £36K on a turnover of £45K? You must be in a service business that's very labour intensive?

Alan_M_2

On a separate point I'm in the process of Moving my business to NatWest Commercial Banking from HSBC (who have been spectacularly obtuse). NatWest seemed far more accommodating, but more expensive.

fivemice

We run a computer repair (and some sales) business.
We currently earn much more than £11k - and whilst somethings are business expenses, somethings like rent and utility bills that we get to write part off are not strictly expenses as we'd have to pay them anyway IYSWIM? So it looks like we earned less than we did. And now we are on £36k after expenses but it still can't be taken into account.

I appreciate many businesses fail, but most fail in the first year IIRC and we haven't even advertised for 13 months but the business is going from strength to strength. It really isn't necessary for us to hold of from buying things - we'd end up with tons of savings yet living a miserable existance. If the business is already flourishing then it would be pointless not to spend what we earned.

Of course, we could continue to rent, but having held off from buying a house for 5 years already we feel ready to buy. We think we have found a company willing to give us a mortgage, interest rate is slightly higher than preferable at 6.84%, but with no deposit and self-employed it seems fair enough.

Alan_M_2

I do see what you mean, but this falls into the category of having your cake and eating it, - you can either offset these things to reduce your tax liability or swallow them to increase your income but increase your taxes.

Also you'll need to budget for a large tax bill this year, as your return 1st year only showed £11K your payments on account will have been one third of what they are likely to be. You could be having to find the best part of £10K immediately as soon as you submit your return.