Will IR35 affect me getting a mortgage?
IR35 is a bit of a head scratcher and with the new rules coming into force you will need to consider if IR35 applies to you.
The new legislation aims to ensure what’s called ‘disguised’ employees pay the same level of tax as employees. A disguised employee is one who, for all intents and purposes, is employed but is working as a contractor.
If as a contractor you have more than one contract running at the same time then IR35 won’t apply. If, however, you have a history of consulting or working for one company with a rolling contract, the chance of being inside IR35 is higher.
Can I still get a mortgage as an IR35 contractor?
The simple answer is yes, although with some lenders it may change your affordability level.
How will IR35 affect me getting a mortgage?
There is no doubt that IR35 is complicated!
Every mortgage lender no matter what your circumstances has their own set criteria to determine affordability and lending. If IR35 applies to you this is an area we need to look at.
The business(es) you work for will now have to determine your working status with them. Previously, you would have been able to determine this for yourself. If you are deemed as an ’employee’ you may be expected to pay more income tax and national insurance which could result in having less disposable income which in turn may impact the affordability of borrowing on a mortgage.
Some lenders however are currently not concerned about the changes at all and would treat your affordability as unchanged.
There are still plenty of mortgages available – we just need to consider what these are for you
What documentation will a mortgage lender want to see from me?
Unlike being self-employed and providing your previous years SA302’s and tax year overviews, lenders may instead want to see payslips and employment history if you fall under IR35. This is because they may treat you like an employee.
Each lender will have their own requirements which means it is important we speak to them about your situation on your behalf to determine what your affordability would be.
What does this mean for me?
Get advice and talk to us early!
That way we can discuss your circumstances with you and explore the lenders available. From here we can plan what options are available and what documentation we may need to give to the lenders in as much time as possible to prepare for securing your new mortgage.