Self employment and mortgages.

A question about : Self employment and mortgages.

Hi people, I have a query.

Long story short, myself and my girlfriend are going to start looking to buy a house towards the end of the year. I am self employed and as such put my expenses on my tax return each April. My expenses normally amount the circa Ј10k. For the past 3 years I've only earned around Ј25k and put my expenses in for the mileage covered etc. I have been told that a lender takes your expenses in to consideration when applying for a mortgage and therefore as far as they will be concerned I only earn Ј15k. I get a lot of money back as a rebate. Is this true?

Best answers:

• Yes, that's correct... they will take your income after expenses - i just got a mortgage on this basis myself.
• The irritating thing is that I now earn a fair bit more. So I assume my only option is stop taking a rebate?
• A lender will take the average of your last two years net profits from your HMRC SA302s.
  This stops the self-employed from massaging their figures in the latest year to justify the mortgage they want.
• It's about paying more tax than you should.
  Basically, you account for your income (turnover) and your outgoings (allowable expenses) on your tax return.
  The figure left over is your net profit and this is the figure lenders work from.
  As I said, lenders take an average of the last two years so they get an accurate figure; otherwise the self-employed would simply say they had no expenses, increasing their tax bills in the current year to justify the mortgage they require.