Self Employed
At Melius, this is where we come into our own!
As of Oct 2022, approximately 4.2 million people* in the UK are Self-Employed, with many in need of specialist mortgage advice. At Melius, we can provide that advice. Our two founders, Daniel & James have always specialised in helping this type of client in what can sometimes be slightly more complex in terms of income verification / overall mortgage application.
The first thing we need to establish is your setup. You may work for yourself directly as a sole-trader, with a business partner as a partnership or under your own company as a director. In any of these scenarios, a lender will consider you self-employed and the assessment of your income will differ as a result.
With the majority of employed applicants, lenders will ask for payslips, P60’s and employers’ references. Being self-employed, you will not have these documents, so how do we evidence your income?
* Please be aware that by clicking on to the above links you are leaving Melius Finance Ltd website. Please note that Melius Finance Ltd nor HL Partnership Limited are responsible for the accuracy of the information contained within the linked site(s) accessible from this page.
Self Employed
Sole Trader
As a sole trader, you are required to complete a tax return each year and provide your income details direct to HMRC. Sometimes it is called a “self-assessment” form, often it is referred to by its previous name – SA302. This document covers the annual period from 5th April – 4th April, commonly known as the financial year in the UK.
When you submit your tax return to HMRC, you will have two documents returned to you;
- - Tax Computation
- - Tax Overview
These documents together, evidence what you earned in the previous year in a concise manner. These are the documents we will require when assessing your income as a sole trader.
Company Director
Directors of personally owned limited companies arguably have the most complex set of rules when purchasing a residential home in the UK. This is due to different lenders assessing your income in different ways, and can become really confusing, really quickly.
Head over to our dedicated Business Owner page for more information (separate link due to the importance of the content?)
Put the same stages in here, modified for self-employed.
** Proving your income when self-employed can be tricky. If you use an accountant to submit your annual income to HRMC, it can often make sense for us to discuss your income with them directly. This way we can discuss certain elements of your income and obtain the documents without taking you away from running the business! **
For detail on the exact information, we will require when assessing your application, please click here.
Legally
Many people in the UK choose to run their business through a limited company. Legally, the business is then recognised separately from the person running it. If you are set up in this manner lenders will class you as self-employed, despite most directors in this scenario taking a salary from the company.
**Please note, there are occasions in larger companies where your shareholding may be under 20%, some lenders would then consider you employed, we will discuss this in more detail with you when you apply**
As a company owner/director you are able to evidence your income in two ways;
- - Personal Tax Return
- - Company accounts
When using company accounts, there are a number of different variances in terms of the way lenders will assess your income. As a general rule, lenders will consider your share of the net profit alongside any salary income taken. Some lenders consider dividends and salary. There are also lenders willing to consider gross profit and, in some instances, retained profit.
Occasionally, we can ask underwriters to consider Management Accounts when considering your income. We understand companies can grow quickly; annual accounts can fail to paint the full picture sometimes!
To date, we have had the biggest impact on this type of client at Melius. Dealing with this type of enquiry is what we do & we have watched a number of our business owner clients grow as we have. All of these applications will be looked after by either Daniel or James & you will be provided with a clear understanding of your financial position from a mortgage perspective.