Mortgage - Issue over shareholder and SA302s

sally1298

Hi All,

My brother is looking for a mortgage.

He wished to use his PT salary for our family business of £6k. He has been paid via PAYE since September 16. (as well as FT salary from his 1st job)

When the Company started 3 years ago, he was added as 33% shareholder but has never received dividends.

Broker has advised he cannot use this salary as he required 2/3 years SA302s because treated as self employed? But he wouldn't have that because he received PAYE from last year?

Any advice appreciated - thank you

ACG

Why would he have been paid PAYE and not dividends? That seems very inefficient from a tax perspective.

There may be lenders who will accept the 2nd job income with a bit of work, is the £6k needed?

sally1298

Thank you for the reply.

I believe he was always paid a small salary with the intention of dividends, should there have been profits. I've spoken with him now and the profits were invested into the business this year and no dividends were distributed.

Yes, without the additional income he would need to leave a deposit of £38k as opposed to £19k.

Would he still be classed as self employed if he sold his shares prior to application (with no intention of having any part of the business, bar being paid a small PAYE salary)? Our dad gave him 33% shares as a gift and he plays no part in the running of it. There were only 3 shares issued in total.

ACG

I think you guys should speak to your accountant.

If he takes his wages as dividends rather than PAYE he gets an allowance which is completely tax free and the remainder he would pay less than 20% tax where as at the minute I am assuming he pays 20% tax + NI on the whole £6k.

It might not be too late to alter the way he takes his income for the tax year 2016-17. In which case he can then use £3k (£6k for this year + £0 for last year averaged out), in addition to that he would also be due a tax rebate of approximately £1200? - My get out of jail card is that I am making some assumptions and I am not a tax advisor, so you should get professional advice.

But there are lenders who will use second income so your broker either thinks they are not an option or is unaware. In either case, there is no harm in trying another broker to see if they have different thoughts.