The lender said eligible directors will now be able to include a proportion of their company’s profit after tax (PAT) in affordability calculations regardless of the property’s value. Previously, eligibility was linked to property value criteria.
Barclays said the move is aimed at providing a fuller assessment of the finances of business owners who choose to retain profits within their companies rather than withdraw them as income.
Under the revised policy, PAT will be considered in line with applicants’ combined shareholding. For example, applicants who jointly own 60% of a business could have up to 60% of its PAT included in the affordability assessment.
Barclays said dividends and PAT from the same business will not be counted together to avoid double counting.
To qualify, applicants must own more than 50% of the company, either individually or jointly. They must also have a qualifying gross annual income of at least £75,000 for sole applications or £100,000 for joint applications, including any PAT being considered, and meet the lender’s other affordability and lending requirements.
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The lender said the change could benefit a wider pool of borrowers. According to Companies House, there are more than five million limited companies in the UK.
Roland McCormack, head of intermediaries at Barclays, said many directors retain profits to support future growth and investment, which can mean traditional income assessments do not reflect their overall financial position.
He said: “Updating our policy means we can more accurately consider a customers’ finances, while maintaining our responsible approach to lending, and ultimately widen access to lending for brokers and their clients.
“This is part of our ongoing commitment to keep listening to brokers, identifying where we can make a meaningful difference and then acting on it – whether that is through our lending policy, technology or the service we provide.”
