I’m moving house soon and will need a mortgage. As a contractor what are the pitfalls?

I’m moving house soon and will need a mortgage. As a contractor what are the pitfalls?

A contractor asks:

I’m in the process of moving house and I’ll need a mortgage. I’ve heard that it’s more difficult to do so as I’m contracting. What do I need to do?

Acumenica answers:

It depends on the lender, and the broker. It’s always best to speak to a broker or lender who, if not specialising in contractor situations, is at least experienced in dealing with them. The underwriting requirements for a limited company owner are much more complicated than for an employed person, so it’s best if you get yourself prepared as early as possible.

As a minimum, in addition to the usual personal financial information, any lender will want to see the past two years tax computations and associated tax year overviews from HMRC. It’s likely they'll want to see the last two years annual accounts too.

Some lenders require your accountant to complete an Accountant’s Certificate showing a summary of the company’s finances for the last three years. 

How do I get these documents?

You can get a copy of your tax computations and accounts from your accountant, if you have one.

Your tax year overview can be obtained from your HMRC online account: Log into your HMRC Business Gateway account using your previously set up User ID and Password, select Tax Years, followed by the year you require the overview for. You then have the option to print the tax year overview - this can either be physically printed or saved down as a pdf document.

For the accountant’s certificate, the lender or broker will normally write out direct to your accountant.

Any pitfalls or difficulties I should be aware of?

If you’ve been trading through your company for less than two years, it’s going to be difficult to obtain a mortgage. Speak to your broker or lender.

Some lenders require your tax returns to be completely up-to-date so they can see current information. if you’re planning on applying for a mortgage ensure your tax returns are filed as soon as possible.

Some lenders also require proof that your tax payments are up-to-date as well. 

You need to remember as well that the process can stake a fair bit longer than if you were a staff employee. You can be at the mercy of HMRC and we all know how slowly they can move. Start the process earlier than you think you need to to avoid any extra stress. And remember, your accountant (especially if it’s an Acumenica accountant) is going as quickly as possible. Shouting at them won’t get things moving any quicker.

Also consider a specialist broker or lender who understands the way you are remunerated, as well as having access to lenders who will be willing to lend to you. You’re perceived as a greater risk by the underwriters, so the whole market may not be available to you. A specialist broker will know which is best. As you’d expect, we have specialist mortgage advisers in our partner network.

Just another reason to ensure that your tax compliance is in order, and we can help you with that. The Acumenica team are on hand to help business owners with all tax matters. To arrange a no-obligation confidential chat, please complete the form on our Contact Us page or call 03330 166559.