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

Mortgage_Mark_2

pelirocco wrote: »

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

It is retained profit though, coming from past years' profits.


I suspect OP has mentioned self employed as this is the way in which lenders will classify a limited company applicant.

Dave_Ham

As stated, whilst the lender and/or solicitor on their behalf may well accept the company bank statement I still believe getting into personal account makes sense.

At some point you will withdraw and pay tax (at higher rate I appreciate) and some lenders will not necessarily just accept the retained profit example given.

Depends wholly upon lender and route to lender, although gut instinct remains the same

silvercar

We transferred the money from the limited company business account straight to our solicitors. We had to provide the solicitor with a proof that I wholly owned the company.

Don't think we needed to provide the lender with anything; after all this was my money (retained profits) that I just hadn't, until that point, withdrawn from the company.

amnblog

Dave_Ham wrote: »

As stated, whilst the lender and/or solicitor on their behalf may well accept the company bank statement I still believe getting into personal account makes sense.

At some point you will withdraw and pay tax (at higher rate I appreciate) and some lenders will not necessarily just accept the retained profit example given.

Depends wholly upon lender and route to lender, although gut instinct remains the same

I am with Dave on this.

It always sets the alarm bells ringing with me if deposit is in the business account as we have often had issues with the lenders over it.

Even the accountants confirmation that the business can spare the cash does not always work.

We had one case with an IT contractor (his business, only shareholder, only employee) where we got a letter from the accountant confirming the withdrawal would not affect the business and the lender (a major player) still declined the case over the deposit issue.

Ironically, all the bank accounts for both applicants, including the business accounts, were with the same institution.

GJ14

Mark_McBurney_CMME wrote: »

It is retained profit though, coming from past years' profits.

I suspect OP has mentioned self employed as this is the way in which lenders will classify a limited company applicant.

Yeah that's correct Mark retained profit is from previous years and I said self employed as that is how the lender views me.


Its seems a 50/50 thing I guess it depends how its explained to the lender and different lenders look at different acceptable factors I guess.


Thanks
GJ

Mortgage_Mark_2

Hi GJ,

In my experience it only tends to differ when you have a lower % ownership of the limited company - anything over 20% I think is classed as self-employed for assessment purposes.

InsideInsurance

GJ14 wrote: »

Yeah that's correct Mark retained profit is from previous years and I said self employed as that is how the lender views me

Mortgage_Mark wrote: »

anything over 20% I think is classed as self-employed for assessment purposes.

A lender cannot change your legal status, you are not self employed. They can however treat Directors who are a major shareholder in the same way as those that are self employed.

Mortgage_Mark_2

InsideInsurance wrote: »

A lender cannot change your legal status, you are not self employed. They can however treat Directors who are a major shareholder in the same way as those that are self employed.

That's exactly what they do - I'm not sure where the question of legal status comes into it?

TrickyDicky101

If you are already in higher rate (40%) tax territory this year then it would likely make sense not to push your income into £100k+ for the financial year as your marginal rate wil be c.60% on anything over £100k due to the withdrawal of the personal allowance (which would be painful).

GJ14

I have decided to withdraw the funds to my bank account this seems to be the best way considering I am not the 100% share holder.


If the mortgage company ask where the money is from they can be shown the trail and can be given a letter from the accountant saying its been drawn as dividend not as a loan.


The longer the money is in my account not the business the more proof it also shows that the drawing has no impact on the running of the business.


I believe this to be the best way time will tell.