Am I Employed or Self Employed? (on questionnaire)
Discussion
I set up an Ltd company for my business, and I am the only "employee". I only receive the tax-free salary with the rest as divs. The usual gig really.
But when filling out application forms etc, do I put that I am self employed or that I am in Full Time employment? I certainly dont want to put down that I only have a salary paying £435 per month.
But when filling out application forms etc, do I put that I am self employed or that I am in Full Time employment? I certainly dont want to put down that I only have a salary paying £435 per month.
You are definitely NOT Self Employed.
You have a salary as a Director of your own Limited Company.
In the questionnaire you need to demonstrate your full income level from the company, which would be a combination of your GROSS salary and your GROSS dividends.
From ny experience, many of these standard questionnaires do not take into account people in your position and you may need to provide some additional notes explaining the situation.
You have a salary as a Director of your own Limited Company.
In the questionnaire you need to demonstrate your full income level from the company, which would be a combination of your GROSS salary and your GROSS dividends.
From ny experience, many of these standard questionnaires do not take into account people in your position and you may need to provide some additional notes explaining the situation.
kryten22uk said:
I set up an Ltd company for my business, and I am the only "employee". I only receive the tax-free salary with the rest as divs. The usual gig really.
But when filling out application forms etc, do I put that I am self employed or that I am in Full Time employment? I certainly dont want to put down that I only have a salary paying £435 per month.
But when filling out application forms etc, do I put that I am self employed or that I am in Full Time employment? I certainly dont want to put down that I only have a salary paying £435 per month.
You are employed.
It is not a huge flaw.
Over the years, there have been many, many incidences of limited company owner/managers (i.e. shareholder/directors) having to declare income for borrowing purposes. Most financial institutions are well aware of the paractice of mixing dividends and salaries and are not concerned about it as long as the situation is properly explained to them.
The flaw is in the standard questionnaire forms which are not subtle enough to take salary/dividend combinations into account.
As I said earlier, an additional explanatory note on the questionnaire - or a chat to the person dealing with your application - should sort things out.
Over the years, there have been many, many incidences of limited company owner/managers (i.e. shareholder/directors) having to declare income for borrowing purposes. Most financial institutions are well aware of the paractice of mixing dividends and salaries and are not concerned about it as long as the situation is properly explained to them.
The flaw is in the standard questionnaire forms which are not subtle enough to take salary/dividend combinations into account.
As I said earlier, an additional explanatory note on the questionnaire - or a chat to the person dealing with your application - should sort things out.
Says who?
ALL limited companies carry limited liability protection. There is no differentiation between single shareholder companies and multiple shareolder companies.
Obviously, if individual shareholders or directors have signed personal guarantees or taken out legal charges on personal property to underwrite company borrowings or commitments, THEN they will have eroded their limited liability status to a certain extent.
ALL limited companies carry limited liability protection. There is no differentiation between single shareholder companies and multiple shareolder companies.
Obviously, if individual shareholders or directors have signed personal guarantees or taken out legal charges on personal property to underwrite company borrowings or commitments, THEN they will have eroded their limited liability status to a certain extent.
Eric Mc said:
It is not a huge flaw.
Over the years, there have been many, many incidences of limited company owner/managers (i.e. shareholder/directors) having to declare income for borrowing purposes. Most financial institutions are well aware of the paractice of mixing dividends and salaries and are not concerned about it as long as the situation is properly explained to them.
The flaw is in the standard questionnaire forms which are not subtle enough to take salary/dividend combinations into account.
As I said earlier, an additional explanatory note on the questionnaire - or a chat to the person dealing with your application - should sort things out.
Over the years, there have been many, many incidences of limited company owner/managers (i.e. shareholder/directors) having to declare income for borrowing purposes. Most financial institutions are well aware of the paractice of mixing dividends and salaries and are not concerned about it as long as the situation is properly explained to them.
The flaw is in the standard questionnaire forms which are not subtle enough to take salary/dividend combinations into account.
As I said earlier, an additional explanatory note on the questionnaire - or a chat to the person dealing with your application - should sort things out.
Agreed.
Although I must say the lenders I have spoken to really do not know the difference. When you explain you are a director of a Ltd co, they say "Oh right, self employed then?", thus the same conversation as this thread ensues.
Also strangely enough they has a rule where for their purposes if you were more than a 30% shareholder they would class you as self employed anyway - and in that situation not applicable for the finance!
So, ironically if I signed ownership of my company away (albeit temporarily) thus leaving myself in a far worse financial position, in their eyes i would be a better lending risk!?
justinp1 said:
Eric Mc said:
It is not a huge flaw.
Over the years, there have been many, many incidences of limited company owner/managers (i.e. shareholder/directors) having to declare income for borrowing purposes. Most financial institutions are well aware of the paractice of mixing dividends and salaries and are not concerned about it as long as the situation is properly explained to them.
The flaw is in the standard questionnaire forms which are not subtle enough to take salary/dividend combinations into account.
As I said earlier, an additional explanatory note on the questionnaire - or a chat to the person dealing with your application - should sort things out.
Over the years, there have been many, many incidences of limited company owner/managers (i.e. shareholder/directors) having to declare income for borrowing purposes. Most financial institutions are well aware of the paractice of mixing dividends and salaries and are not concerned about it as long as the situation is properly explained to them.
The flaw is in the standard questionnaire forms which are not subtle enough to take salary/dividend combinations into account.
As I said earlier, an additional explanatory note on the questionnaire - or a chat to the person dealing with your application - should sort things out.
Agreed.
Although I must say the lenders I have spoken to really do not know the difference. When you explain you are a director of a Ltd co, they say "Oh right, self employed then?", thus the same conversation as this thread ensues.
Also strangely enough they has a rule where for their purposes if you were more than a 30% shareholder they would class you as self employed anyway - and in that situation not applicable for the finance!
So, ironically if I signed ownership of my company away (albeit temporarily) thus leaving myself in a far worse financial position, in their eyes i would be a better lending risk!?
It can really get quite amusing sometimes. I have responded to a request for confirmation of salary for myself. No one seemed to notice the slight discrepsncy that the name of the person doing the confirmation was the same as the person that the request was for.
It's indicative of the triumph of "compliance culture" over a culture of common sense.
They asked the correct question.
The employer supplied the expected answer.
Therefore no warning bells triggered. The obvious fact that the employer and the employee were virtually one and the same person was not picked up because no one was primed to pick it up.
They asked the correct question.
The employer supplied the expected answer.
Therefore no warning bells triggered. The obvious fact that the employer and the employee were virtually one and the same person was not picked up because no one was primed to pick it up.
Edited by Eric Mc on Friday 18th May 12:46
Eric Mc said:
You are definitely NOT Self Employed.
You have a salary as a Director of your own Limited Company.
In the questionnaire you need to demonstrate your full income level from the company, which would be a combination of your GROSS salary and your GROSS dividends.
From ny experience, many of these standard questionnaires do not take into account people in your position and you may need to provide some additional notes explaining the situation.
You have a salary as a Director of your own Limited Company.
In the questionnaire you need to demonstrate your full income level from the company, which would be a combination of your GROSS salary and your GROSS dividends.
From ny experience, many of these standard questionnaires do not take into account people in your position and you may need to provide some additional notes explaining the situation.
I had this when I applied for a mortgage. My accountant actually worked out the equivilant wage that s 'normal' employee would have to earn to take home what I do with my £5k and dividends and dropped a line to my mortgage lender. I would be inclined to quote that figure rather than the £5k. If they ask for 'proof' they can see a set of accounts I guess?
Eric Mc said:
It's indicative of the triumph of "compliance culture" over a culture of common sense.
They asked the correct question.
The employer supplied the expected answer.
Therefore no warning bells triggered. The obvious fact that the employer and the employee were virtually one and the same person was not picked up because no one was primed to pick it up.
They asked the correct question.
The employer supplied the expected answer.
Therefore no warning bells triggered. The obvious fact that the employer and the employee were virtually one and the same person was not picked up because no one was primed to pick it up.
Edited by Eric Mc on Friday 18th May 12:46
Agreed.
It got funnier when they asked me for payslips for proof instead of my account statements which of course I offered as a true viewpoint of my earnings, this was rejected.
They have no understanding that is you are a director and thus are not paid through PAYE...
...but if you can print of some payslips they can tick their box and verify everything!
I pay myself a single, variable monthly amount to cover my salary, dividend, mileage and out of pocket expenses. Invariably a significant sum, especially when I have used my personal credit card for work related expenses. If a lender wants to see payslips I could print myself some showing the full amount received paid as salary.
Technically that would be fraud - as it is not "Salary". To represent your income as such would be incorrect.
However, as I said earlier, there should be no need to go to such lengths. Lenders should be well aware by now of the nature of owner/managed limited companies and how the individuals involved remunerate themselves.
However, as I said earlier, there should be no need to go to such lengths. Lenders should be well aware by now of the nature of owner/managed limited companies and how the individuals involved remunerate themselves.
Luckily when I got my last mortgage (8mths ago), my credit score was such that they didnt want any form of proof from the broker. They just accepted whatever I said my total income was. Usually with larger more formal borrowings its ok, but its the smaller lamer things that cause a problem. For instance a recent car finance enquiry required that I was in full time employment AND paying national insurance contributions. Never seen the latter requirement before, but on a standard proposal form I guess I would fail before I even had change to offer dividend details.
Edited by kryten22uk on Monday 21st May 20:55
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