80k deposit but cant get any type of Mortgage please help

Mortgage_Mark_2

ChumpusRex wrote: »

However, by declaring only a small personal income, most of the money is not his, it's the company's. He therefore can't go buying a house with it without incurring massive tax liabilities.

...unless he then pays himself a large dividend, which is taxed very differently to a salary.

amnblog

ChumpusRex wrote: »

However, by declaring only a small personal income, most of the money is not his, it's the company's. He therefore can't go buying a house with it without incurring massive tax liabilities.

A borrower who controls the company can 'go buying a house' off of 'the company's money' without incurring massive tax liabilities.

All they need is the correct advice.

stu007

nospaceforbaby wrote: »

its just difficult thinking about selling it because its cutting off any potential I had hoped to gain from it after 7 years of ownership, it would be as if I had just rented all these years so it would cement the fact that I have achieved absolutely nothing so far. think id rather torch it than sell it tbh unless sale price allowed me to gain some benefit rather than just handing it over for nothing. thanks

You have an interest only mortgage. What did you think would happen?

Earlier you said you had a 120% mortgage, so if selling sees you clear the mortgage, you must have gained the 20% in capital growth

nospaceforbaby

now looking at porting the mortgage, transferring to another property, still with NRAM same deal monthly payment etc but just transferring the property over, then I could use the 80k to reduce the debt down to 160 and monthly payment either down or repayment.

haras_nosirrah

You may want to check northern rock will let you do that

On 18k between you you will probably not be able up port the mortgage as they will treat you as a brand new customer and you don't earn enough

Thrugelmir

nospaceforbaby wrote: »

The reason these tax schemes are legal is because the people who make the rules are also fiddling tax, expenses and anything else they can get a way with

Many people don't. Yes they use legitimate tax planning. Only a fool would fiddle to the extreme. For no other reason than it's actually very obvious to the trained eye. So really isn't worth the hassle. As once the HMRC get their fangs into your accounts there's no limit to their powers. No 6 year limitations, assessments get back dated to the year dot with no right of appeal.

Thrugelmir

nospaceforbaby wrote: »

with respect the situation now is very different from how it was decades ago, as an example we currently have a higher % than ever before of adults still living at home with their parents well into their 30`s due to the widening gap in wages in relation to the cost of living and purchasing a property - things were different in your day so you can afford to have more of a moral compass.

With respect the boom years are over. Lending is returning back to where it was. So are interest rates. Everything moves in cycles. Later in life you'll realise that your peers were correct.

nospaceforbaby

Thrugelmir wrote: »

Many people don't. Yes they use legitimate tax planning. Only a fool would fiddle to the extreme. For no other reason than it's actually very obvious to the trained eye. So really isn't worth the hassle. As once the HMRC get their fangs into your accounts there's no limit to their powers. No 6 year limitations, assessments get back dated to the year dot with no right of appeal.

its a perfectly legal scheme used by millions of contractors in the uk, you are demonstrating a complete lack of experience on the subject but thanks for your input.

[Deleted User]

Mortgage_Mark wrote: »

He's a contractor, working through a limited company. It's the companies income, of which he's a director and pays himself salary and dividends. The company pays tax on it, he pays tax on his income from it. It's all above board.

"I am self employed and in order to save up the deposit I have declared very low earnings in order to minimise my tax bill - I had to switch to this model because I was unable to save anything in the way of deposit over 2011-2013 while on the previous tax model"

The difference in tax paid between a person operating through a limited company taking dividends vs. a person operating self employed (or PAYE for their own company) is not that large. Enough to justify doing it? Absolutely! However for him to have saved £80,000 just because of how he structured his tax affairs he would need to be earning north of half a million pounds (based on my crude calculations).

Either the figures he has presented are pure fiction or he is doing something illegal.

[Deleted User]

I thought about it more and decided to be generous and suppose that maybe the OP is telling the truth. I decided that perhaps he exaggerated a bit but he was telling a true story, therefore to test the viability of his story I had to make some assumptions, they are:

1. The tax years in which he "unable to save anything" (an exaggeration) he was able to save £10,000
2. His household spends £4,000 per month (£48,000 per year) (seems reasonable given his £950 mortgage)

Using the information from the opening post in conjunction with assumption #1 I suppose that at the start of the last tax year he had £20,000 (2 x £10,000) and then during the tax year he saved another £10,000 (without any tax magic) leaving him with £50,000 to conjure up with efficient tax management.

I'll use "worst case" to mean he pays the maximum amount of tax (as a PAYE employee of his own company) and the "best case" to mean he pays the least amount of tax (dividends!) -- I know that taking unneeded money out of the company is very silly and tax inefficient but this is just to demonstrate the point!

If he earns £100,000 the worst case take home is £58,471.26, the best case take home is £70,630.81. This means that by using the most efficient tax structuring with £100,000 he can stand to save an extra £12,000 per year, but that's still far short of the £50,000 target we have to make his figures work!

If he earns £200,000 the worst case take home is £95,672.15 and the best case take home is £125,813.36. That's a £30,000 difference, which is getting closer, but still far short of the £50,000 target! Also at this point it's worth noting even if his take home was the worst it could be at £95,000 per year he would have already be very able to build a healthy deposit.

If he earns £300,000 the worst case take home is £149,099.21 and the best case take home is £181,368.92, that's a difference of £32,000 per year but still far below the £50,000 a year. Also at this point note the diminishing returns, his tax savings are not noticeably greater!

If he earns £500,000 the worst case take home is £244,046.66 and the best case is £287,271.69, that's a difference of £43,000! We're getting there, so close to the £50,000 required... but at this point his take home is so high this entire thing sounds like fiction. Let's continue anyway!

If he earns £650,000 the worst case take home is £313,906.06 and the best case is £366,698.78, that's a difference of £52,000! We've made it, the £50,000 figure! Yet, for this to work... his take home pay would be £30,000 per month, if he was taking home that much every month he'd have no problem saving for a deposit!

I think those examples clearly demonstrate that there is no legal tax structuring that can allow someone to take home an extra £50,000 per year unless they earn over half a million per year.

Let's add that with the following other facts:

1. He is against renting but put a deposit on a £240k flat 8 years ago and has no equity (therefore lost a lot of money!)
2. Has a flat in London that has not seen any value appreciation in 8 years

This story is either fiction or... well, I don't want to say it's "obviously" a troll because there are situations in which someone can be a successful business person and have no idea about tax, or saving, or renting, or personal finance in general... but I struggle to believe it.