Director of Company - Salary or Dividends?

GregH

Hello All

I started my company 2 years ago but only started full time with it 12 months ago. For the past year I have been taking the maximum salary without having to pay Tax and NI and topping up my salary by withdrawing money I invested in the company when it started (Directors Loan to the company).

With the new financial year and wanting to move house, I need to decide how i am going to pay myself from now on, by salary or a fixed monthly dividend. Would mortgage providers accept a set monthly dividend as income?

I know I want to have my cake and eat it, get a mortgage and pay less tax, I would be grateful for any advice.

Also, how many years of company accounts will a mortgage provider need to see?

Thanks in advance.

ACG

Lenders will accept wages and dividends as a form of income yes - so long as your accounts back it up.

They wont accept repayment of a directors loan as income.

GregH

Thanks ACG.

I appreciate that the Directors Loan would not be taken into account by mortgage lenders. Do you know how far back they would need to see company accounts? As I said before, my company has been established for over 2 yrs but was pretty much dormant for the first 12 months.

Thrugelmir

GregH wrote: »

As I said before, my company has been established for over 2 yrs but was pretty much dormant for the first 12 months.

The trading history is critical. As its this that determines the salary that can be withdrawn irrespective of the type. You are going to require further full years of accounts. In order for a lender to assess your application fully.

ACG

How big is your deposit?

If you have a 25% deposit you may get away with just one years accounts. If you have 10% then you will probably need 2-3 years.

alabama_2

I am in a similar situation, and have been advised by both my bank, HSBC and an independent broker that I will need two years of accounts.

Most mortgage companies seem to treat Directors with the majority shareholding as Self Employed and your dividend income needs to be taken, rather than retained. So unfortunately if you need the money our for your deposit, or just to demonstrate income we've got to take the tax hit!

Gary123456790

Hi,

We are in a similar situation in that my wife is a contractor through her own limited company. Most lenders wanted 2 years accounts but she only has 1, we found https://www.contractormoney.com assessed the value of the contracts the company has and were able to secure the mortgage we needed.

My wife is in IT, not sure if that makes a difference. This only works if you are a contractor through a limited company for tax purposes.

Thanks,

Gary.