Meet the Other Phone. A phone that grows with your child.

Meet the Other Phone.
A phone that grows with your child.

Buy now

Please or to access all these features

Property/DIY

Join our Property forum for renovation, DIY, and house selling advice.

Self employed - private pension/mortgage help

4 replies

Syrinx89 · 20/01/2020 15:20

Hey guys; help pretty please!

I'm looking to buy my first property in the next couple of years. As a self employed person, I would also like to open a private pension to pay into each month. Due to the way self employed mortgage offers work, I need to keep my net earnings as high as possible to ensure that I get the biggest mortgage offer possible (which involves not claiming my usual expenses etc.!). My question is whether my yearly pension payments will have a negative effect on my earnings to show the mortgage lender, or whether it wouldn't be deducted? I need to know whether to wait to open my pension until I've bought a property, or whether it's ok to open it now, and that it won't affect my chances of getting a mortgage! Thank you!

OP posts:
BubblesBuddy · 20/01/2020 18:34

If you are employed, your salary is taken as before pension contributions. My DD has two years of accounts as self employed and is needing a mortgage so we will see what happens. However I think it’s gross income that matters most but they might want to see your accounts.

PigletJohn · 20/01/2020 19:13

If you have your own business, you have the opportunity to have the business make the contributions to your pension, rather than paying them yourself out of your earned income.

Although you get tax relief either way, when the pension payments are made by the business, they do not appear on your payslip, so there is neither employer nor employee National Insurance to pay.

Depending on your earnings, this may be around 25% of the gross, so is a big saving.

Company employees can sometimes do the same, if the employer agrees, calling it "salary sacrifice"

If you want to maximise your taxable salary, to increase the mortgage you can get, I suggest pausing or reducing your pension contributions temporarily, then making them towards the end of the tax year, when you have calculated your profits and decide what you can afford.

Annoyingly, when I used to make contributions from the company account, HMRC accused me of claiming the personal tax rebate, as if they had come from my own taxed earnings out of my own account. This was not true, as I could easily show, but the company who did my payroll (accountants often offer this service) was dragged into an investigation which caused them additional work and expense, and this led them to refuse to continue it. Once HMRC have you down as a suspect they can make your life a misery.

PigletJohn · 20/01/2020 19:17

p.s.

My status was "employee."

If you are a Sole Trader, the rules will be different and I do not have experience of them. I have a friend who used to be a sole trader and set up as a limited company which he said made things simpler.

PigletJohn · 21/01/2020 14:06

You might like this

New posts on this thread. Refresh page
Swipe left for the next trending thread