Director buying first house problems

OceansX1

Hi All,

I'm looking for some advice. I'll try and give all the details i can to make any advise easier.

Me and my wife are currently looking at buying our first house. We have a deposit saved of £30,000, and are looking at properties in the region 250 - 270.
We have been living with her parents for the last 10 months, and are able to stay there until we buy a house, which we're really grateful for.
We have a broker and have an AIP with Halifax.

Now here lies my problem. I am a company director with a 13% share. Over the last 4 years i have been paying myself £2000 an month. and dividends at the end of the year of about £8000.

Our broker told me i would need SA302 forms from HMRC. I spoke to our company accountants and they haven't filed in any assessments for me over the last 4 years. Apparently BY LAW they don't have to, as i actually don't pay any personal tax. Out of all the money i pay myself, £8500 of it is not dividends. Ive confirmed with HMRC i dont have SA302.

Now i know I cant expect to pay minimum tax, and then look like I earn a fortune. Unfortunately it doesn't work both ways.

This has caused a massive problem, as without SA302 no banks are interested in lending to us.

So what i have now done is got the accountants to sort my pay as PAYE. Ive put myself on a wage of £40,000. I hoping with 3 months pay slips it will be easier to obtain a mortgage.
My wife is on a salary of £27000 so we should be able to borrow more than we need.

As we are first time buyers we are not very mortgage savvy, but I'm hoping suddenly being on PAYE as a director wont look suspicious. I still earn the same, no lies have been told, i just get paid a more mortgage friendly way.

Any advise on whether this is the right way to go would be much appreciated.

agrinnall

Why don't you ask your accountant whether you can retrospectively file tax returns? That way you'd be able to get the SA302s that the broker requires. I'm not sure how far back you can go but I wouldn't be surprised to find you can do 4 years.

Hoploz

I know this is a problem. I happened to change my status from employee to shareholder (my husband is the sole director) when we remortgaged a few years ago, and the broker made us stop and change back again, as my simple change in status which had no financial difference whatsoever would not be favourable to our application!

Likewise when we bought our last house I had to file an SA form as our accountants had decided for themselves that I did not need one, something about not being up to some threshold or other ... But the mortgage company required me to have one, so it had to be done afterwards.

However, I think you might struggle to backdate things three years as you describe.

Not much help I'm afraid, but just urging you to tread very carefully because yes, all changes, however insignificant, are definitely taken into account.

jimpix12

I had loads of issues with my first mortgage, situation was similar to yours. In the end I submitted 3 years of personal bank statements. It took about 3 weeks to get approved.

OceansX1

Thanks for the replies. Ive spoken to HMRC and they won't back date my assessments, so i definitely dont have any SA302's available. :-((((.
After speaking to a few friends who have gotten mortgages recently, they only needed 3 months pay slips. If I am on PAYE for 3 - 6 months with a signed contract, surely the previous SA302 wont come into question. It would be no different to me getting a new job??. I'm really hoping that's the case, otherwise I cant see how we are going to be able to get a mortgage.

theartfullodger

So you arranged your affairs (I'm guessing..) so as your perceived, declared, income was low & tax likewise low...

And now you find having got lots of paperwork confirming you earn not much you are now somewhat discombobulated.....

Easy to fix.. simply report income ensure more is declared (eg don't claim so many "expenses"..) and you pay more tax so get betting offers from lenders!! Job done!! And then you get to keep paying tax man for another year on the assumption those numbers were typical..

Have you done 2014/2015 return yet?? If not do it & fix your problem, and contribute more to the UK as a taxpayer!

Cheers (Happened also to a close relative of mine..)

OceansX1

Your right in my tax was low as was my declared income. But I have litreally no paperwork to prove it other than an accountants certificate showing takings. By being paye I will "contribute more to the uk as a taxpayer" I can get an assesment done for 2014/2015. Not sure how that will fix my problem. I was hoping paye would solve all the issues!!!!

Hoploz

Your problem is now going to be that you have changed your status (yes, just like getting a new job) and so now this will be the sticking point. The lenders like you to have remained in the same status (or employment) for a long while.

Your friends may have only produced three months pay slips, but have they been in thir jobs for longer?

You will need a good broker to get around this in the short term. Or sit and wait for a year or so.

star02

If you are a company director you are always required to do a tax return.

https://www.gov.uk/self-assessment-tax-returns/who-must-send-a-tax-return

If you complete 14/15 this will then allow HMRC to produce the report.

If you have only taken dividends equal to the basic rate band there will be no outstanding income tax due.

kingstreet

I'd have used a lender which works from an accountant's certificate alone and none of this would have been a problem.