Moving from Employed to Self-Employed

maracles

I’m soon going to be leaving my job and becoming self-employed – there is no firm date and I have quite a bit of flexibility on when I make this move. I’m posting here searching for advice on best handling this transition without making things overly difficult for myself.
Currently I’m employed at a company and do freelance work on the side, in this scenario the majority of my salary is PAYE with additional income from the freelance work which is invoiced for.

In the near future I will be predominately freelance but will also consult for the same company on the side. The freelance work I do is based in the Film & TV industry where the type of employment is slightly odd; for many productions I will be hired for the duration of the job (maybe 1 day, 1 week or several months) and then let go. For other jobs I’ll invoice and be paid as a freelancer. The high frequency in which I can be employed and leave a ‘company’ (a particular production) can sometimes leave HMRC a bit confused based on my previous experience!

From a financial point of view my biggest concern is where this will leave me in terms of getting a mortgage. I currently co-own a property which is in the process of being sold and I’m looking to buy somewhere else as soon as possible afterwards, however will be doing it by myself. As I understand it this makes my ability to get a mortgage much more difficult as I will not have a history of income as a freelancer.

What should I be doing to make myself and my income look as attractive as possible to potential mortgage lenders?

Should I set myself up as a limited company and have all income paid into that so at the end of the day I withdraw a single salary? As I understand it this will not be helpful until the company as a proven history?

Should I stay at the existing company until I have secured another mortgage (if I can)? If so how do I ultimately set myself up to get a mortgage as self-employed?

I am not particularly knowledgeable in this matters at the moment but doing my research, any suggestions are warmly welcomed.

ACG

It does not matter if you are limited or a sole trader, you will need at least one years accounts/self assessments in order to get a Mortgage once you go self employed. Your choice of lenders will be limited and rates will be higher until you have at least 2 years accounts.

DracoNoir

From my experience, self-employment causes vast issues when mortgaging - having said that, I am on a relatively low income and I am a first time buyer so really not a good combination (not to mention other unfavourable circumstances).

As ACG says, you will need at least 1 years accounts or SA302 and Tax Year Overview if you don't have an accountant. You can get these from your HMRC account a few days after you file your return. Majority of lenders prefer 2 years and some even want 3 as they will take an average.

More particular to my case is the fact it will heavily affect the LTV you will be accepted at (though again, our circumstance differ). If you have a good deposit to put down, this may not affect you but this is just what I have experienced.

Can't stress enough that getting a good broker will save you a LOT of hassle!

Good luck!!

csgohan4

ACG wrote: »

It does not matter if you are limited or a sole trader, you will need at least one years accounts/self assessments in order to get a Mortgage once you go self employed. Your choice of lenders will be limited and rates will be higher until you have at least 2 years accounts.

ACG is right, I had to have 2 years accounts to get rates which were reasonably competitive. Anything less it's not impossible but you might not get a good rate.