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Director of a company, best route to get mortgage

socialchaos
socialchaos Posts: 14 Forumite
First Anniversary First Post Combo Breaker
edited 19 May 2017 at 11:11PM in House buying, renting & selling
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Comments

  • theartfullodger
    theartfullodger Posts: 14,588 Forumite
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    So you've been manipulating - entirely legally of course - your income to keep tax down: And now find mortgages hard to come by because of this.

    Simple solution: Pay yourself like normal people get paid (higher PAYE salary) for a few years &, job done! But you must have known that, surely, someone as "canny" as you eh?

    And you want more help from the "Government"? (You mean in reality from decent hard-working tax-payers...)

    Cheers!
  • Cliveman_Pieman
    Cliveman_Pieman Posts: 85 Forumite
    Speak to a mortgage broker, is the direct answer to your question. Strangers on the Internet will not be much help.

    To be tangential, you are asking me as the taxpayer to support your business and now your property empire, this rankles a bit but fair play at least you're honest about it all.
  • agrinnall
    agrinnall Posts: 23,344 Forumite
    First Post Combo Breaker
    If what you are paying yourself is all you can afford based on the profits generated by your business, and that amount is currenty below minimum wage, then I don't see how you can possibly thnk you are in any position to get a mortgage just now. You need to bide your time, build up your business so that it is making enough profit to pay yourself a decent amount (salary/dividend combination) and go to a mortgage broker with your audited accounts. I'd say that will be in several years time as a minimum.
  • The_Real_Cheddar_Bob
    The_Real_Cheddar_Bob Posts: 542 Forumite
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    VAT is not an optional tax. Well none of them are, so if you claim VAT then you will need to submit a VAT return on a quarterly basis.

    Now if i remember correctly, the VAT threshold for a business, where it makes it viable to claim back VAT is £83,000 turnover a year.

    How can you pay corporation tax if you are a new startup? You pay corporation tax once yearly, and then you have nine months to pay it. In effect, you start work January this year, nothing to pay to the government until September 2018, at the latest.

    As a minimum you have been trading a year to have paid corporation tax and im amazed you would willingly pay it earlier than you need to.

    Usually start up businesses dont pay much in the way of any tax, the costs of setting up in the first year are usually significant and there will be many ways to avoid parting with any unnecessary cash.

    Paying yourself below the minimum wage and claiming tax credits is a new low for any company owner. I'm amazed i read that in the first place. shameful.
  • Cliveman_Pieman
    Cliveman_Pieman Posts: 85 Forumite
    rjwr wrote: »
    Now if i remember correctly, the VAT threshold for a business, where it makes it viable to claim back VAT is £83,000 turnover a year.

    It can be viable to be VAT registered as long as your input vat exceeds your output, which is possible for a newco. Another reason companies voluntarily register is that your clients do not know that you turnover less than 83k ie you can appear bigger than you actually are.
  • Cliveman_Pieman
    Cliveman_Pieman Posts: 85 Forumite
    socialchaos wrote: »
    It's not a one cap fits all situation. I run a marginal business with lots of overheads. Fairplay if we had high margins on all of our stock. Have built this thing from the ground up, 18+ hours a day and have only just started realising a profit as predicted in my cashflow report. 0 income in the first years, robbing peter to pay paul.

    I didn't come on here to get slated or abused. It's hardly unheared of, just take a look on other business forums and you will see im not alone. Lots of directors need a handup so they can have a albeit minimal quality of life while they build a business which will eventually help fund the economy.
    Yet despite this hardship you want to commit to 25 years worth of debt? You could just rent somewhere else and see if your business continues to grow.

    I don't think people have been particularly harsh, but what you're proposing doesn't exactly smell of roses. But if you want mortgage advice in your undoubtedly complex situation, you need to speak to a broker.
  • ellie27
    ellie27 Posts: 1,097 Forumite
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    socialchaos wrote: »
    Hi guys

    Im a director of a ltd company and Im wondering how best to go about getting a mortgage.

    My current situation is that I pay myself a salary below the tax threshold and less than minimum wage. This gets topped up by tax credits (WC & CT) and housing benefits.

    That is disgusting! You must be ashamed to admit that?
  • The_Real_Cheddar_Bob
    The_Real_Cheddar_Bob Posts: 542 Forumite
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    socialchaos wrote: »
    It's not a one cap fits all situation. I run a marginal business with lots of overheads. Fairplay if we had high margins on all of our stock. Have built this thing from the ground up, 18+ hours a day and have only just started realising a profit as predicted in my cashflow report. 0 income in the first years, robbing peter to pay paul.

    I didn't come on here to get slated or abused. It's hardly unheared of, just take a look on other business forums and you will see im not alone. Lots of directors need a handup so they can have an albeit minimal quality of life while they build a business which will eventually help fund the economy tenfold.

    VAT
    My accountant back then once I had hit the threshold advised me to split my company into different sectors and not to register, I ditched him. I disagree with the corporation mindset of lets dodge the taxman. Everything I'm doing is above board, fair enough there are some loopholes at play but its all in aid of survival.


    So as per your comment above, your marginal business as you put it turns over in excess of £83,000.

    I find it exceptionally hard to believe that with the current tax system you are not in a position to financially support yourself without claiming benefits from regular tax payers.

    That said, if you need benefits, you wont be able to get a mortgage so your question is redundant.
  • The_Real_Cheddar_Bob
    The_Real_Cheddar_Bob Posts: 542 Forumite
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    Cliveman_Pieman wrote: »
    It can be viable to be VAT registered as long as your input vat exceeds your output, which is possible for a newco. Another reason companies voluntarily register is that your clients do not know that you turnover less than 83k ie you can appear bigger than you actually are.

    i disagree with this. The affect of claiming back after the initial glory period of claiming back large quantities of VAT severely outweighs the short term benefit of registering for VAT below the threshold.

    I agree with your point that very few but some businesses might benefit from the perception of being larger, however the goal here is to surely increase turnover
  • The_Real_Cheddar_Bob
    The_Real_Cheddar_Bob Posts: 542 Forumite
    Name Dropper First Anniversary First Post Photogenic
    socialchaos wrote: »
    Hi guys

    Im a director of a ltd company and Im wondering how best to go about getting a mortgage.

    I read this below as:
    My current situation is that I (deliberately) pay myself a salary below the tax threshold and less than minimum wage. This gets topped up by tax credits (WC & CT) and housing benefits. I on occasion also take out directors loans and repay the business.

    I have an excellent credit rating with healthy monthly repayments being paid on credit cards and a 10k personal loan which I have loaned to the business.

    Just wondering how best to go about applying for a mortgage. I know some directors use some kind of a loophole where they pay all of the benefits into the business (Directors loan in) and then pay themselves the whole amount as a salary, though this may well attract some tax. This option may be inefficient, considering I need benefits to you know, live and stuff.

    Otherwise if I were to go to my bank, nationwide, surely they may refuse because I i'm in receipt of benefits?

    Also taking my income into consideration would I still be eligible for help from the government towards deposit? helptobuy etc.

    This may seem a little far fetched but it makes sense to buy if I can. House prices in my area are £750+ but mortgages are £480 per month which is much more affordable.

    Thank you in advance :)


    this is your issue and the reason for the lack of willing help
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