Mortgage for Company Director - PAYE + Dividends

[sagarich]

I'm looking to move house in the near future.

Based on a recent valuation of our house and our joint outgoings, I know what I can afford and roughly what I "could" be lent... However, this is a based on the assumption I'm employed on PAYE.

I currently take a low salary via PAYE and then take the rest in monthly dividends.

How would a lender calculate how much I can borrow? Would it be based on my last tax return? Past 3-6 month net salary (including or excluding divs) or would they require all this along with company accounts?

I have a feeling that there's no right answer to this and all lenders calculate differently, but interested to hear anyones experiences and any companies that specialise in my situation.

[hajaba123]

Standard answer (and the right one generally) is speak to Sarnie on here. He's a good mortgage broker who has helped out lots of PHers

He'll be along soon no doubt, if not let me know and I'll send you his email address

[Sarnie]

hajaba123 said:

Standard answer (and the right one generally) is speak to Sarnie on here. He's a good mortgage broker who has helped out lots of PHers

He'll be along soon no doubt, if not let me know and I'll send you his email address

Thanks!!!

[Sarnie]

sagarich said:

I'm looking to move house in the near future.

Based on a recent valuation of our house and our joint outgoings, I know what I can afford and roughly what I "could" be lent... However, this is a based on the assumption I'm employed on PAYE.

I currently take a low salary via PAYE and then take the rest in monthly dividends.

How would a lender calculate how much I can borrow? Would it be based on my last tax return? Past 3-6 month net salary (including or excluding divs) or would they require all this along with company accounts?

I have a feeling that there's no right answer to this and all lenders calculate differently, but interested to hear anyones experiences and any companies that specialise in my situation.

Lenders will take your salary and dividends as your income and calculate your affordability in the normal way.

However, most lenders will require SA302's these days which are documents from HMRC which confirm your stated income. Most lenders will want a minimum of two years SA302's and will most likely apply an average of the figures across the SA302's provided.

[sagarich]

Sarnie said:

Lenders will take your salary and dividends as your income and calculate your affordability in the normal way.

However, most lenders will require SA302's these days which are documents from HMRC which confirm your stated income. Most lenders will want a minimum of two years SA302's and will most likely apply an average of the figures across the SA302's provided.

Thanks Sarnie, looks like I need to sit tight for a while.

Although I'm sure I can borrow additional funds with current salary and divs combined, I've only just filed my first SA302 along with first year co accounts.

Also, if they apply an average thats not great news for me as I was paying myself peanuts during the startup period.

[sagarich]

Thanks for all the PM's guys, will look into each one this evening.

[Eric Mc]

I few points on SA302s.

An SA302 is a letter issued by HMRC which shows your tax liability calculation for the tax year based on the details you have provided on the Self Assessment tax return (the SA100).

HMRC DO NOT issue SA302s automatically except in certain circumstances. These circumstances are as follows -

you submit your tax return ON PAPER and you do not calculate your own tax liability

you have submitted your tax return (either on paper or on line) but you have made such a monumental mess of the figures that HMRC are forced to issue you with a calculation showing where you went wrong.

If you

a) use an accountant who submits your returns on-line (and does them correctly)

b) you submit your own returns on-line (and do them correctly)

HMRC will NOT issue an SA302 automatically.

In these circumstances, you will have to contact HMRC yourself and request that they send out an SA302 to you.

[Patch1875]

Interesting advice I'm in a similar situation of looking to move next year. I also take a low salary and monthly dividends but I have accounts for the last 6 years.

[Sarnie]

sagarich said:

Thanks Sarnie, looks like I need to sit tight for a while.

Although I'm sure I can borrow additional funds with current salary and divs combined, I've only just filed my first SA302 along with first year co accounts.

Also, if they apply an average thats not great news for me as I was paying myself peanuts during the startup period.

There are a very small number of lenders who will take one years SA302 and an accountants projection but there are restrictions on LTV's and rates aren't great. It just depends on how much you want to move right now.

[sagarich]

Eric Mc said:

I few points on SA302s.

An SA302 is a letter issued by HMRC which shows your tax liability calculation for the tax year based on the details you have provided on the Self Assessment tax return (the SA100).

Thanks Eric, I skim read Sarnies initial post. My accountant filled my first SA100... When required I will need to request one from HMRC.

Thanks for the clarification.

[sagarich]

Sarnie said:

There are a very small number of lenders who will take one years SA302 and an accountants projection but there are restrictions on LTV's and rates aren't great. It just depends on how much you want to move right now.

In that case I can wait, thanks for your help.

Whether or not the wife can wait... thats another matter

[Eric Mc]

sagarich said:

Thanks Eric, I skim read Sarnies initial post. My accountant filled my first SA100... When required I will need to request one from HMRC.

Thanks for the clarification.

I would request one now - so you have it.

And I would request one each tax year - if you feel you will need to have them. As you have an accountant it is unlikely HMRC will ever have the need to issue one automatically.

[Casa1862]

Are SA302 required for Buy to Let Mortgages? I got the impression that as long as I had 70% LTV and over about £20k income I'd be ok. No mention of SA302 when I went to see Leeds BS this week.

I'm a director and own 50% of the shares, Mortgage advisor seemed to think that makes me self employed, but I've always put down employed as the company is limited and I'm employed by it.

Edited by Casa1862 on Friday 7th November 19:16

[Sarnie]

Casa1862 said:

Are SA302 required for Buy to Let Mortgages? I got the impression that as long as I had 70% LTV and over about £20k income I'd be ok. No mention of SA302 when I went to see Leeds BS this week.

I'm a director and own 50% of the shares, Mortgage advisor seemed to think that makes me self employed, but I've always put down employed as the company is limited and I'm employed by it.

Edited by Casa1862 on Friday 7th November 19:16

You are employed by a company that you own 50% of, therefore for mortgage purposes, you are self employed...your accountant will say you are employed however.

[Casa1862]

Thanks, and yes accountant and I always state that I'm employed. I've got upto date accounts which declare the dividend,(6 years worth) will I still need to mess about with SA320 forms etc.

[Sarnie]

Casa1862 said:

Thanks, and yes accountant and I always state that I'm employed. I've got upto date accounts which declare the dividend,(6 years worth) will I still need to mess about with SA320 forms etc.

They have a minimum income requirement of £20k which you will need to satisfy, one way or another.....

[DSLiverpool]

My accountant says monthly dividends are a huge no no - max frequency is quarterly I am told or hmrc will view it as a salary and come after you - or is that rubbish ?

[jonamv8]

DSLiverpool said:

My accountant says monthly dividends are a huge no no - max frequency is quarterly I am told or hmrc will view it as a salary and come after you - or is that rubbish ?

Take a divi weekly if you want, hmrc cares about the total at end of year

[jonamv8]

DSLiverpool said:

My accountant says monthly dividends are a huge no no - max frequency is quarterly I am told or hmrc will view it as a salary and come after you - or is that rubbish ?

Take a divi weekly if you want, hmrc cares about the total at end of year

[red_slr]

DSLiverpool said:

My accountant says monthly dividends are a huge no no - max frequency is quarterly I am told or hmrc will view it as a salary and come after you - or is that rubbish ?

I would be looking for a new accountant.