Self employed taking a dividend for new house deposit advice please.

GJ14

Hopefully someone advise the best practise for this.

I plan to take a lump sub dividend of 60k from the business as the deposit for a house. The business can afford this over the past twelve months the savings account has gone from 60k to 130k steadily growing so by drawing it will not have an effect on the day to day running of the business.

My main question is i have to show proof of deposit so is it best that I draw the 60k from the business now into personal savings so its drawn as my dividend or should I retain it within the business and say the money is coming from the business when we get an offer ?

If I draw 60k now they will ask where its from I will tell them its from the business anyway but is it best to show it in my account rather than the business bank account.

Some advice on the best option here would be great I don’t want to draw money now and get told why have you just drawn a lump sum and on the other side I don’t want to leave it in the business and get told you cant use that as proof of deposit.

Either way I am entitled to take the money at anytime I choose but want to take it in the best way that it doesn’t raise any concerns to lenders as I have enough hoops to jump through been classed as self employed.

Thanks
GJ

circuit

If your business is turning over that much, you must have an accountant? What does s/he say?

GJ14

circuit wrote: »

If your business is turning over that much, you must have an accountant? What does s/he say?

The accountant says I can take it whenever I please but she is not a mortgage adviser so I was just after the advise of someone who knows the mortgage market do's and don'ts in regards to this kind of deposit.


Thanks
GJ

Dave_Ham

Get the funds into your personal account asap, almost all lenders will have an issue with funds in a business account

GJ14

Dave_Ham wrote: »

Get the funds into your personal account asap, almost all lenders will have an issue with funds in a business account

Thanks Dave I appreciate your reply.


Thanks
GJ

holly_hobby

The mortgage underwriters ideally want it to be saved from income, but essentially they reason they are iffy with direct from business capital, is that they will want to make sure that the deposit is not a directors loan from the business, or withdrawal of daily operating capital, and that it won't in any way negatively affect trading - to that end you may be asked/will want to demonstrate that the capital is essentially solely retained profits, which although available for withdrawal, have essentially been retained within the ltd co up until now for tax planning purposes (either income if you don't have a set PAYE operation, or dividend related) - and its withdrawal (which is substantial in amount !) in no way will affect future trading/pch of stock (if thats relevant for your business/sector).

To that end, if you have a mortgage offer already issued, I would suggest drawing it out and have it ready in your savings account, if they ask the source, you can explain why its only just recently appeared in your personal account, and the reason for it coming from your ltd business (ie originating source).

Your mortgage broker should liaise with any lender issues.

Hope this helps

Holly x

questionss

I agree with the advice to get it into your personal account in advance ...

However also consider when are you looking to buy/get a mortgage and is it better for you to take the dividend in this tax year or next? (Or some in both....) this is especially relevant At this time of year

GJ14

Thanks for the advise.


I already drawn just over the higher tax band so anything more I draw will be taxed highly mainly the reason for not drawing it until a mortgage offer is in place.


I had not explained this point but its a good one. Ive provided company bank statement for the past 12 months showing that the money i plan to draw is not been used as working capital.


I guess if i don't get an offer i will just have to draw it pay the tax and apply again fingers crossed.


In hind sight i should of drawn it 6 months ago before looking for a property by the sounds of it but the past is the past so cant change it now.


Thanks
GJ

Wh05apk

I have done this on a number of occasions and have never had issues with the deposit coming from the business, some lenders require a letter of confirmation from all directors if you are not the sole director, and may need to see business statements.


Whichever account the funds are in, if they have just been transferred in the lender will question the source, so no advantage in transferring now, as obviously will have tax implications.

Mortgage_Mark_2

No need to put it in your personal account, give the lender a bank statement from the company account showing the money sat there, but also a letter from your accountant stating that by taking the money out of the company it will have no adverse effect on your business; i.e. that you won't go bust by taking that amount out.


Common practice amongst limited company contractors in particular.

pelirocco

GJ14 wrote: »

Hopefully someone advise the best practise for this.

I plan to take a lump sub dividend of 60k from the business as the deposit for a house. The business can afford this over the past twelve months the savings account has gone from 60k to 130k steadily growing so by drawing it will not have an effect on the day to day running of the business.

My main question is i have to show proof of deposit so is it best that I draw the 60k from the business now into personal savings so its drawn as my dividend or should I retain it within the business and say the money is coming from the business when we get an offer ?

If I draw 60k now they will ask where its from I will tell them its from the business anyway but is it best to show it in my account rather than the business bank account.

Some advice on the best option here would be great I don’t want to draw money now and get told why have you just drawn a lump sum and on the other side I don’t want to leave it in the business and get told you cant use that as proof of deposit.

Either way I am entitled to take the money at anytime I choose but want to take it in the best way that it doesn’t raise any concerns to lenders as I have enough hoops to jump through been classed as self employed.

Thanks
GJ

If you are drawing dividends isnt it a ltd company? , therefore you arent self employed

Remember you can only draw dividends from profit , eben tho you may have a large sum of money in the account , it may not be profit