Self employed mortgage - Net profit

Mrs_Kralc

Hi all,

Long time lurker but first time posting.

Myself and hubby are looking to move home.

Hubby is self employed. When working out how much we can borrow Natwest (our current provider) based the figures on his profit after tax. I assumed the figure would be his net profit (so after all his business expenses have been accounted for) but pre-tax. Have looked online and seem to be getting conflicting messages.

Does anyone know if this is correct and if so is the same with all lenders or are there some out there who would take net profit pre-tax?

muhandis

The means of calculating self-employed income, eligibility and affordability can vary considerably across different lenders. To ensure that you use one that will view your circumstances most favourably, I would strongly recommend consulting a broker.

They can point you in the right direction be it to maximise potential borrowing (if you need it) or get the best rate available.

Natwest might not necessarily be the lender best suited to your situation.

Good luck!

Mrs_Kralc wrote: »

Hi all,

Long time lurker but first time posting.

Myself and hubby are looking to move home.

Hubby is self employed. When working out how much we can borrow Natwest (our current provider) based the figures on his profit after tax. I assumed the figure would be his net profit (so after all his business expenses have been accounted for) but pre-tax. Have looked online and seem to be getting conflicting messages.

Does anyone know if this is correct and if so is the same with all lenders or are there some out there who would take net profit pre-tax?

ACG

Natwest want the average of the last 2 years after expenses but before tax.

Whatever the pre tax figure on your SA302/Tax year overview for the last 2 years, average that out and use that.

kingstreet

As ACG says, net profit for the self-employed is pre-tax.

It's the figure in box of the 31 of the self-employed section of the SA Online Tax Return or the "Profit From Self-Employment" figure on the Tax Calculation which results from the return.

For directors of limited companies, share of post-tax (corporation tax) net profit and director's salary may be used by some lenders.

Mrs_Kralc

Thank you all. I think I will call NatWest back and double check as they definitely took the tax and national insurance off the net profit and used that figure which I thought didn’t sound right.