Accountants face the unenviable task of being asked on the one hand to minimise tax bills and on the other to show personal income at a high enough level for clients to secure a mortgage. For any business owner there has to be a balance made between the two and there should be a long term strategy certainly if there is a need to secure a mortgage at any stage.
Requests from mortgage companies come in many formats and accountants may be required to provide some of the following:
- Details of personal income, either sole trader profits,or income as declared on the tax return
- Accounts for the clients company
- Both of the above for previous 2 years
- Often a projection of the next year
Factors which may need to be considered include
- Demonstrate an increasing level of income
- The split of of income between members of family business where mortgage is based on main earner
- While drawing down on a directors loan account may be tax efficient;
- May need to declare dividends to show taxable income
This year there has been a move to more mortgage lenders requiring SA302 tax calculations from HM Revenue and Customs which are purely based on personal taxable income. If tax returns are submitted using the HMRC online submission they can be downloaded immediately but otherwise will have to be requested by calling them. This may cause a delay in the application, however these are sent out fairly promptly, recently in one to two weeks.
This only covers some of the considerations to be made so you should seek professional advice before taking any steps based on the information shown. If you would like advice in this or other areas feel free to call. Alastair Wood, AW Accounting, Gravesend, Kent – Accountants who “speak your language”