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Self employment and mortgages.
liam080888
Posts: 7 Forumite
Hi people, I have a query.
Long story short, myself and my girlfriend are going to start looking to buy a house towards the end of the year. I am self employed and as such put my expenses on my tax return each April. My expenses normally amount the circa £10k. For the past 3 years I've only earned around £25k and put my expenses in for the mileage covered etc. I have been told that a lender takes your expenses in to consideration when applying for a mortgage and therefore as far as they will be concerned I only earn £15k. I get a lot of money back as a rebate. Is this true?
Long story short, myself and my girlfriend are going to start looking to buy a house towards the end of the year. I am self employed and as such put my expenses on my tax return each April. My expenses normally amount the circa £10k. For the past 3 years I've only earned around £25k and put my expenses in for the mileage covered etc. I have been told that a lender takes your expenses in to consideration when applying for a mortgage and therefore as far as they will be concerned I only earn £15k. I get a lot of money back as a rebate. Is this true?
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Comments
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Yes, that's correct... they will take your income after expenses - i just got a mortgage on this basis myself.0
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liam080888 wrote: »therefore as far as they will be concerned I only earn £15k.
That's what you do earn. Expenses incurred as part of running your business. Without then you would have even lower gross earnings.0 -
The irritating thing is that I now earn a fair bit more. So I assume my only option is stop taking a rebate?0
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A lender will take the average of your last two years net profits from your HMRC SA302s.
This stops the self-employed from massaging their figures in the latest year to justify the mortgage they want.I am a mortgage broker. You should note that this site doesn't check my status as a Mortgage Adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice. Please do not send PMs asking for one-to-one-advice, or representation.0 -
kingstreet wrote: »A lender will take the average of your last two years net profits from your HMRC SA302s.
This stops the self-employed from massaging their figures in the latest year to justify the mortgage they want.
Ah right, my accountant mentioned that form. So would not taking a tax rebate benefit me then?0 -
It's about paying more tax than you should.
Basically, you account for your income (turnover) and your outgoings (allowable expenses) on your tax return.
The figure left over is your net profit and this is the figure lenders work from.
As I said, lenders take an average of the last two years so they get an accurate figure; otherwise the self-employed would simply say they had no expenses, increasing their tax bills in the current year to justify the mortgage they require.I am a mortgage broker. You should note that this site doesn't check my status as a Mortgage Adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice. Please do not send PMs asking for one-to-one-advice, or representation.0
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