Self-employed mortgage - salary or dividends?

kwhybro

Hi all,

I'm just waiting for end of tax year before submitting our full mortgage application. My accountant wants me to put my salary down as the usual small salary with rest as dividends. I'm concerned, though, that the dividends won't be considered a proper income & may affect our affordability?

Any advice greatly appreciated!

kingstreet

Your assumption is incorrect.

Lenders will take the average of your last two years' director's remuneration and dividends added together, or your latest year's if lower.

Typically, a limited company owner will pay themself director's remuneration at the LEL with the bulk of their income in dividends.

This is expected.

Thrugelmir

If it's your Company. Then the profits can be distributed as you wish.

kwhybro

Sorry, just to be clear, they are basing our lending on the latest year's accounts as this is the highest. We already have the AIP from Halifax but I didn't mention that some of the salary would be dividends.

kingstreet

Ah yes.

The person who has been told Halifax will base lending on latest year's figures because they are higher.

It isn't the way the system works, but as we have no way of knowing what buttons a Halifax employee might be pushing, we can't challenge it. I suspect you will suddenly find you've only been in business one year. Ask for a copy of the application form when it's been submitted.

I just hope it doesn't come to bite you in the proverbial when it gets further up the food chain.

Either way, director's remuneration and dividends are added together. There is only one box into which these two figures go when added together "net profit," as you treat as self-employed on Halifax Online.

kwhybro

I've been in business three years. The latest figures at the highest which is why we're waiting for tax year end. Thanks!