Limited Company director - which figure to use as income?

917700

Hi All

I am a limited company director and own 100% share of the company. I am just wondering which figure to use as income? Is the answer depends on different lenders?

My company account period is from 1st November to 31 Oct next year, and its balance sheet shows my salary and dividend in that period. My question is should I use the figure on company accounts or the figure on SA302s tax overview? My company's profit sharply rise this year, do I have to wait for 2020-2021 SA302 is done to use it as income figure?

Thanks for any advice. 

917700

To add:

I saw an form called Accountant certificate (reference) from Santander, which confused me again. On that form, it seems like they use the figure based on company accounts. 

Cscott139

Depends on the lender. Most go off the sa302 although some will use company accounts and others will go for an accountants reference. Which lender are you approaching?

Cscott139

Or even better, use a broker who will sort it all out for you

MattMattMattUK

YOUR income is listed on the SA302, your company's income is listed in it's accounts, you and your Limited company are legally separate, regardless of the fact that you own 100% of the shares. 

Some lenders will base things only in you income, based on SA302s and supporting documents, this is generally far simpler and easier to obtain. Other lenders will base the figures on company profit and retained profit within the business, this is usually more complicated, involves more work to get a mortgage will only be based on completed years accounts, with supporting documents and they will usually only take accounts prepared by a certified accountant, rather than self-prepared. 

You are better off speaking to a broker who specialises in Ltd company owner/directors. You will also probably have to wait. 

dunstonh

I am just wondering which figure to use as income? Is the answer depends on different lenders?

It wont just be one figure.

Salary, dividends and retained profit. Along with turnover, gross profit and net profit.   Typically going back over the last 3 years. 

I saw an form called Accountant certificate (reference) from Santander, which confused me again. On that form, it seems like they use the figure based on company accounts. 

If you are using Santander then they will need that form completed by your accountant.

Your broker should be advising you on all this.  It makes the whole process cleaner if you liaise via your broker.

917700

MattMattMattUK said:

YOUR income is listed on the SA302, your company's income is listed in it's accounts, you and your Limited company are legally separate, regardless of the fact that you own 100% of the shares. 

Some lenders will base things only in you income, based on SA302s and supporting documents, this is generally far simpler and easier to obtain. Other lenders will base the figures on company profit and retained profit within the business, this is usually more complicated, involves more work to get a mortgage will only be based on completed years accounts, with supporting documents and they will usually only take accounts prepared by a certified accountant, rather than self-prepared. 

You are better off speaking to a broker who specialises in Ltd company owner/directors. You will also probably have to wait. 

Hi

Thanks for the reply. Yes, I learned lender will base things on sa302s and year tax overview. However, limited company is different with sole traders/contractors. Limited companies have its different financial start date and end date. 

My confusion is that lenders say they will accept salary and dividend for limited company directors, but which support documents and which periods are they looking for? My company profit sharply increased in the latest financial year, however, my latest dividend won't show on sa302 until April 2021. 

I can't work out my budget because there is a big difference with different figures. 

[Deleted User]

917700 said:

MattMattMattUK said:

YOUR income is listed on the SA302, your company's income is listed in it's accounts, you and your Limited company are legally separate, regardless of the fact that you own 100% of the shares. 

Some lenders will base things only in you income, based on SA302s and supporting documents, this is generally far simpler and easier to obtain. Other lenders will base the figures on company profit and retained profit within the business, this is usually more complicated, involves more work to get a mortgage will only be based on completed years accounts, with supporting documents and they will usually only take accounts prepared by a certified accountant, rather than self-prepared. 

You are better off speaking to a broker who specialises in Ltd company owner/directors. You will also probably have to wait. 

Hi

Thanks for the reply. Yes, I learned lender will base things on sa302s and year tax overview. However, limited company is different with sole traders/contractors. Limited companies have its different financial start date and end date. 

My confusion is that lenders say they will accept salary and dividend for limited company directors, but which support documents and which periods are they looking for? My company profit sharply increased in the latest financial year, however, my latest dividend won't show on sa302 until April 2021. 

I can't work out my budget because there is a big difference with different figures. 

It all comes down to the fact that different lenders work differently. There is no hard and fast rule with self employment.   Some will take the companies figures, some will take the sa302 figure. Some will take sal + share of profit, some will take just sal+divi, some take figures before corporation tax, some take it after. 

Self employed mortgages are very complex if you are trying to get the highest borrowing amount out of the figures

Harria01

2 years backup for nationwide, self assessments and company accountant certificate, 3 months personal and company bank statements oh and i had loads of questions around furlough and impact of covid!

MattMattMattUK

As others have said it really depends on the lender. I am an owner/director, my mortgage is with Halifax via a broker and they only use SA302s and supporting documents, the amount of profit made by or retained profit in the limited company is not factored in. Other lenders will lend based on company finances.

The other thing to factor in is that no lender will lend based on an incomplete year/accounting period, they will only accept the last complete period, they will also usually take an average of the last three, not just the best, or the most recent.

If you speak to a broker they will know which lenders lend on what basis and based on the info will be able to give you your options. 

haras_n0sirrah

Some lenders are salary and dividends
Some are salary and profit after corporation tax
Some are salary and profit before corporation tax
The best option depends on how much you need to borrow