Barlow Irvin Financial Services Director, Gary Oxborough, explains how mortgage lenders assess your income if you are self-employed.
If you are self-employed or a company director with over 20% shareholding in the business, then mortgage lenders will assess your income on the profits of the business over the last couple of years, rather than your current income. For most people, this is based on the income declared on your tax return and is usually evidenced from your Tax Computation forms that your accountant will produce.
Mortgage lenders need these figures to be no more than 18 months old. This means that, as from 5th October, you’ll need your 2022/23 figures. As you will know, these figures do not need declaring to HMRC until 31st January, which means many accountants will not have done these for you yet or even asked you for your details. If you are planning on applying for a mortgage, either to buy a new property or remortgage, then it’s essential that you have these 2022/23 figures available.
Some accountants may well be “ahead of the game” and have your tax return done, but many work to the 31st January and will not have started work on them yet. Every year we have this conversation with accountants who tell us that tax returns don’t have to be done until 31st January, which is correct for HMRC purposes, but not if you need them for a mortgage application.
One of the priorities for anyone looking to apply for a mortgage is to get everything ready in plenty of time and if you are self-employed, then asking your accountant to do your figures now is certainly one of them.
As always, please get in touch with the Barlow Irvin Financial Services award-winning team if you have any questions.
As a mortgage is secured against your home or property, it could be repossessed if you do not keep up mortgage repayments.