Reimbersed travel costs - included in lending calculation?

butagirlcandream

I am currently trying to apply for a mortgage, and I’ve spoken to a couple of mortgage brokers and financial advisors but keep getting conflicting advice.

I earn a basic salary of 18.5k, but my company also subsidise my travel to London, which I pay for on a monthly basis and claim back on expenses. This works out as just under 4.5k year on top of my salary, and this amount has been declared to HM Rev and Customs, and as such I pay tax on approximately 23k worth of “earnings”.

The discrepancy from advisor to advisor seems to be that, as the travel costs do not appear on my payslip, they cannot be included when calculating the amount I can borrow.

I have various proofs from my company and HM Rev and Customs that show the amount I receive and the tax I pay on it, so I believe I should be able to borrow 3.75 times the approx. 23k, but no one seems certain as the arrangement is quite strange/rare (so I’m told…).

Obviously, without the 4.5k included in the calculation, I need to find an additional 16k for a deposit which just isn’t feasible.

I’m going from broker to broker, advisor to advisor, and no one seems to know with any certainty – any advice on the situation? Is it worth me speaking directly with lenders? I’m a first time buyer so ideally wanted to go through a broker, but willing to try anything.

Many thanks in advance.

kingstreet

If you spend £4,500 a year on travel and your employer reimburses you £4,500 a year for that travel;-

how is that income

how is that taxable?

Is this like private mileage where from home to work is personal and anything you do between work and elsewhere is business?

As an example, if you got a company car, the BIK would not form part of your income for mortgage purposes, despite it increasing the amount of tax you would pay...

butagirlcandream

Hi and thanks for replying.

The way it works is I buy a monthly season ticket to travel to London, which costs £360ish. I buy that on a monthly basis and claim it back on a monthly basis with my other expenses.

It is declared as a “benefit in kind” I believe, if that helps at all? All I know is it is taxable because I’ve been paying tax on it since May last year!

I’ve been told that London waiting allowances would be included, and I don’t see how this payment is different, especially if tax must be paid on it? If it is not part of my income then what is it? It isn't a bonus or overtime?

butagirlcandream

Thanks for your reply.

One thing that has been agreed unanimously is that, if the amount I receive each month was printed on my payslip, there wouldn't be an issue. That is what makes it even more frustrating, because it works the same as your reimbursement, but doesn't seem to qualify to lenders.

Oli.s

How do they reimburse you, my employer reimburses me in a similar way for travel but it is paid with my salary and is on my wage slip.

SeduLOUs

So basically you are given a 'benefit' of commuting costs on top of your salary.

Unfortunately you can't use your season ticket to pay for your mortgage, so I'm not sure why you would expect them to take this into account for income purposes?

The only place it would come into play is if they look at your monthly outgoings as a consideration as to whether to or how much to lend - your commuting costs could be removed or significantly reduced from the list as they are being reimbursed by your employer.

movilogo

Cost reimbursed by your employer is not consider earning and thus not included in mortgage affordability calculation.

SeduLOUs

movilogo wrote: »

Cost reimbursed by your employer is not consider earning and thus not included in mortgage affordability calculation.

It clearly is considered 'earnings' as OP is paying tax on the value. This isn't just normal mileage, this is employer covering the cost of the normal commute to work.

It is a benefit in kind, so it is taxable income, but because it is a payment/reimbursement of a season ticket and not additional 'cash', it wouldn't be considered as income for the purposes of a mortgage application.

It's in the same vein as company cars and private health insurance - they are taxable benefits to the employee, but of little use when it comes to making mortgage payments.

westv

Surely the income is £18k and the season ticket less company subsidy counts as expenses?

butagirlcandream

Thanks everyone, not what I wanted to hear but good to have it clarified.

Thrugelmir

SeduLOUs wrote: »

It clearly is considered 'earnings' as OP is paying tax on the value.

Any form of benefit is taxable. So as to avoid employers bending the rules so to speak by remunerating employees in an indirect fashion.
Doesn't mean that the benefit is earnings as such.