Mortgages as an umbrella company PAYE employee

hanrutmoe

Hi,

For the last 2 years I've been accepting contracts & renewals with the same company, which I have taken via an umbrella company, officially making me a PAYE employee, rather than self-employed.

I am looking to become a first time buyer and recently contacted a housing provider who wants me to complete a financial assessment. Due to my somewhat non-standard situation the advisor suggested using my P60 as the most accurate source of my reported income, but on further inspection I can see my P60 is actually pretty misleading, in terms of how much take home money I'd be able to contribute towards a mortgage.

My umbrella company offered tax return on my food and travel expenses for the first year and a half, the way they have done this is to deduct my expenses from my gross pay (reported to HMRC) and then adding them back to my take home, additionally they take their margin before my gross too. This ultimately means my gross is reported as over £4k less than it 'really' is.

Other PAYE employees obviously have to pay for food, travel etc too, but the advantage they have is that it doesn't impact their reported gross.

Is this likely to be a problem when it comes to getting a mortgage? I have created an in-depth spreadsheet to explain my situation, with all my numbers included for the last 12 months, and can provide all my payslips, but will the low gross reported on my P60 mean mortgage providers won't even give me the time of day?

My projected income for the next 12 months is much higher, due to a recent increase in my rate, and the fact that I no longer claim expenses so they will not be deducted from my reported gross, however it seems mortgage providers are more concerned about the past.

Thank you,

Hannah

Thrugelmir

hanrutmoe wrote: »

Other PAYE employees obviously have to pay for food, travel etc too, but the advantage they have is that it doesn't impact their reported gross.

People in employed positions pay such costs out of after the deduction of tax and national insurance. So it's swings and roundabouts.

hanrutmoe

Thrugelmir wrote: »

People in employed positions pay such costs out of after the deduction of tax and national insurance. So it's swings and roundabouts.

It isn't, as these amounts are not deducted from their gross income.

To expand, it would mean someone paid the same amount as me, would have a reported gross income of £4,000 more than me, due to their expenses coming out after tax.

For this property in particular, they require a gross income that is £2k more than my P60 gross, but £2k less than my actual gross.

As far as I can tell, mortgage lenders are more concerned about your gross than your take home, and I guess that's what I'm questioning here. How important is your gross on your P60 to mortgage lenders? Will they take into account your actual take home?

amnblog

It may be food allowance but you can't have your cake and eat it.

Either it is income which interests both the lender and the taxman, or it isn't.

hanrutmoe

amnblog wrote: »

It may be food allowance but you can't have your cake and eat it.

Either it is income which interests both the lender and the taxman, or it isn't.

Sorry but that's not addressing my query.

I want to know how feasible/likely it is that mortgage lenders will look at my situation in detail and not focus on the gross P60 income alone.

System

additionally they take their margin before my gross too. This ultimately means my gross is reported as over £4k less than it 'really' is.

That is correct. The gross that the umbrella get is not your gross but the gross that the umbrella as your employer is being paid to supply you to the firm that you are working for. Your gross is that amount ,minus their admin, employer's NI etc

hanrutmoe

!!!!!! wrote: »

That is correct. The gross that the umbrella get is not your gross but the gross that the umbrella as your employer is being paid to supply you to the firm that you are working for. Your gross is that amount ,minus their admin, employer's NI etc

I'm not saying it's not, but as mentioned in my initial post, I am no longer claiming expenses, however in order to see that they are going to have to go off my current payslips, not my P60 which is reporting me a lot lower for last year than it will next year.

To be totally clear, I am not discounting my P60, I understand that's how they should be deducted, what I am asking is for your advice on how crucial the P60 is when applying for a mortgage, or whether my recent pay slips can be utilised as a more effective indication than my P60.

amnblog

amnblog wrote: »

Either it is income which interests both the lender and the taxman, or it isn't.

I thought I was clear.

If the taxman cannot treat it revenue as income, neither can a Lender.

hanrutmoe

amnblog wrote: »

I thought I was clear.

If the taxman cannot treat it revenue as income, neither can a Lender.

That is not what I'm asking...

To be totally clear, I am not discounting my P60, I understand that's how they should be deducted, what I am asking is for your advice on how crucial the P60 is when applying for a mortgage, or whether my recent pay slips can be utilised as a more effective indication than my P60.

I am no longer expensing, and have not been for 4 months. However if all they look at is my P60, I'm considered to be earning a lot less, because last year I expensed for 8 of the 12 months, and was also on a lower rate for 9 months. If they look at my payslips now, they can see I have enough income.

Mortgage_Mark_2

amnblog wrote: »

I thought I was clear.

If the taxman cannot treat it revenue as income, neither can a Lender.

Not strictly true.

Sounds as if OP is a contractor.

kingstreet

hanrutmoe wrote: »

will the low gross reported on my P60 mean mortgage providers won't even give me the time of day?

Many lenders don't ask for it.

However, your Month 12 payslip shows the P60 YTD data which will end up on your P60. As people get mid-year payrises, this is not normally a problem.

Typically, lenders take three months' payslip income with different treatment for basic and variable earnings

or an average of the last two years' net profits from SA302s/accounts

or an average of the last two years' director's remuneration and dividends

or gross contract value for a contractor.

An experienced broker will help you with an approach which best suits your circumstances.