Self-employed mortgage - FTB - better to pay more tax and have higher average income?

frangipan23657

I'm about to apply for a FTB mortgage as a self-employed sole-trader (joint app with my employed partner). My taxable income for latest tax year means I can avoid going over the £49,999k threshold. However, averaging with the previous year (with lower earnings) takes me much lower, meaning we risk not getting the mortgage we desperately need. With massive rises in house prices we are getting stung on all sides.

Would it better for me to effectively deduct fewer expenses this year, to declare higher earnings to boost my income average, or would that be totally crazy? The difference would be about £4-5k and would take me over the £49k tax threshold. 

danlewi2

Do you pay any of your salary into a pension?

Btw the threshold is 50,270.

frangipan23657

No I haven't previously.

danlewi2

You can claim tax relief if you go over the tax threshold.

frangipan23657

danlewi2 said:

You can claim tax relief if you go over the tax threshold.

Thanks. Could you point me to where I can read more about this please? I didn't know. 

comeandgo

If you present low expenses figures for your self assessment you risk an HMRC investigation as previous and probably future years will be higher so could be thought you are claiming too much in those years.    If you falsify figures to help get a mortgage you are fraudulently manipulating your profits.  Could you not look at a cheaper property?

frangipan23657

I would hope that it's a stretch to say I would be manipulating profits! I am simply asking that if my allowed expenses are lower this year and I pay more tax, will I have better offers from lenders with a slightly higher average? My expenses fluctuate all the time, and have dropped during pandemic with less travel. 

ACG

Queries like this generally mean you are either committing tax evasion or mortgage fraud. 
Ultimately you are either putting through expenses that you should not be or you are not putting through expenses you should/ordinarily would do in order to increase your income and therefore borrowing capacity. 

Yes your expenses will go up and down, but that was not your question.

Im not here to judge by the way, just explaining as you seem to be downplaying what you are doing. Obviously it happens and you are hardly up there with Al Capone but hopefully you get the idea. 

frangipan23657

ACG said:

Queries like this generally mean you are either committing tax evasion or mortgage fraud. 
Ultimately you are either putting through expenses that you should not be or you are not putting through expenses you should/ordinarily would do in order to increase your income and therefore borrowing capacity. 

Yes your expenses will go up and down, but that was not your question.

Im not here to judge by the way, just explaining as you seem to be downplaying what you are doing. Obviously it happens and you are hardly up there with Al Capone but hopefully you get the idea. 

Genuinely didn't know this would be seen this way. I assumed, obviously wrongly, that some of my allowable expenses could not be included. I presumed that paying more tax would not be an issue. I'm also not deliberately downplaying anything(!), not sure where you get that idea. I'm obviously just clueless. I'm not a mortgage adviser. I'm not a tax adviser, hence why I am on here for advice. 

ACG

It was just this that made me think you were downplaying it. 

I would hope that it's a stretch to say I would be manipulating profits! 

Dont worry, I know its not our field so wouldnt expect you to know. I just thought I would lay it out and then you can decide with the knowledge. Knowledge is power and all that. 

As I said, I am not here to judge. 

frangipan23657

Again, it comes from a place of genuine lack of knowledge understanding, so I appreciate being enlightened in a non-judgemental way! The origin of the query was actually through an adviser, so I will take this back to them and proceed with extreme caution. I'm just hoping I can find a lender who won't deduct SEISS grants as well. The self-employed don't have it easy with mortgage applications!