Getting a mortgage with under 25% shares in a limited company

LauraStockwell1996

I've read that if you have over 25% (some lenders 20%) shares in a limited company, you are classed as self employed. So does this mean if you have under 25% shares in a company you're treated as employed and only need 3 payslips? Any help gratefully received!

kingstreet

Typically, yes.

K_S

LauraStockwell1996 said:

I've read that if you have over 25% (some lenders 20%) shares in a limited company, you are classed as self employed. So does this mean if you have under 25% shares in a company you're treated as employed and only need 3 payslips? Any help gratefully received!

@LauraStockwell1996 Generally speaking that is correct (though the number of payslips requested could be anything ranging from 1-12 at underwriting).

20%, 25% and 33% are the most commonly used thresholds.

However, as happened to one of my clients recently, if the shareholding is close to the threshold, underwriters *could* subject it to further scrutiny to make sure there isn't anything material being withheld.

LauraStockwell1996

Thank you! How does it work with showing tax also? as a director I don't pay tax monthly, I do a personal tax return in April. Will this effect a morgage?

K_S

LauraStockwell1996 said:

Thank you! How does it work with showing tax also? as a director I don't pay tax monthly, I do a personal tax return in April. Will this effect a morgage?

@LauraStockwell1996 Generally speaking, if considered to be self employed, most mainstream lenders will take divs+salary or share of net profits+salary as your income.

If considered to be employed (less shareholding than the threshold)  it'll be assessed based on the basic PAYE income from the company. If that doesn't meet affordability, some lenders will let you opt to be treated as self-employed to meet affordability.

[Deleted User]

if you want to be assessed as employed then you will only be using payslips to prove your income. So no dividends.  If your income is derived from dividends then you will want to be assessed as self employed otherwise you won't have a proveable income. 

If you are using payslips then you are an employed director and the company should be taxing you under PAYE anyway.

MWT

LauraStockwell1996 said:

Thank you! How does it work with showing tax also? as a director I don't pay tax monthly, I do a personal tax return in April. Will this effect a morgage?

Being a director of a limited company doesn't give you any PAYE breaks, you should be getting taxed monthly on your employment income.

If you are not being paid as an employee, but are charging 'Directors Fees' and receiving dividends then you are right back to being 'self-employed' ...