This week’s comment comes in response to: The tax regime for self-employed people is ‘diametrically opposed’ to lending criteria – analysis
Michelle Lawson said: “I have been saying this for ages. You can have an employee that hasn’t started a job yet, on a probation period or expecting a pay rise and you can take future income for this however, self-employed you usually look at the history of income over the last two years averaged generally.
“The latest year’s income for self-employed should be used and also for limited company directors they should be able to use the greater of the PAYE/dividends on tax calculations or profit before tax plus PAYE element. Especially when gross income is used for employees and not net, as not every company takes everything out of the business all the time.”
She added: “This doesn’t then mean they can’t afford the mortgage. It means they are taking out what they need/want for now. On top of this, where management accounts are available for a good proportion of the current year and they reflect a more positive position, these should be considered where an accountant’s explanation can be given (e.g. company growth/expansion or new contracts).”
“Come on lenders – much more innovation is needed on this as the self-employed are generally very committed to their cause and to succeed and earn money rather than some employees that float from job to job.”
The comments here are from our readers and do not necessarily reflect the views of Mortgage Solutions and Specialist Lending Solutions.
