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Like your lunch, contractors, with umbrella company payroll services there’s no such thing as free

‘Free Payroll Services’ are a hook to avoid

Nonetheless, there is a scourge on the umbrella sector, with companies right now posing as legitimate ‘umbrella’ companies but that are not actually doing what ‘umbrella company’ says ‘on the tin.’ These spurious brolly operators seem to be out in force without blushing, often openly using every trick in the book to try and take advantage of unsuspecting contractors.

These operators are using enticers like the promise of “free payroll services” to land custom. So contractors need to be on their guard. Make sure you do your ‘due diligence’ before agreeing to any sort of relationship.

If you’re not paying for the product…

Remember, while nothing comes for free, these operators will be making money in some way in order to be commercially viable. As another saying goes, ‘If you’re not paying for the product, YOU are the product.’

One way they try to make money is to withhold money from your pay that should be going towards HMRC, to cover the tax and national insurance contributions of the contractors they work with.

Liability when using an umbrella company

A key point to remember, though, it is always the contractor who is liable for any money owed to HMRC.

Unpaid tax bills will always see HMRC pursue the contractors and not the providers – and these operators can and do unfortunately disappear just as quickly as they pop up!

Worryingly, I have seen cases where HMRC has come after contractors four or five years down the line. So tax consequences are often not felt initially or for some time. But usually after a few years, these companies have completely disappeared without a trace.

Get in touch with us today to speak with the UK’s Best Contractor Mortgage Broker.

How are these brolly operators getting away with this?!

There are a number of ways these companies are taking advantage of contractors right now. Pay Per Click (PPC) advertising is a big one and the use of search engines like Google can be a honey trap — particularly with the promise of things like “free payroll services.” Often, these operators might appear as some of the first search results that come up when searching online for an umbrella company.

But sometimes, it can be through brokers or word-of-mouth referrals from other contractors who genuinely believe they are onto a good deal.

Recruiters too need to be mindful of who they recommend to contractors and who makes it onto their Preferred Supplier List (PSL).

Agencies must make sure they are aware of these types of operators and the potential risk they pose to their clients. Many contractors will take the recommendation of a recruiter as gospel, so there is a duty of care here that must be upheld by individual agents.

All that glitters may not be gold

The websites of the operators are also designed to win trust with messaging like ‘100% compliant’ or even ‘HMRC approved’ to dupe people into singing up. Please be aware, ‘HMRC-approved’ simply does not exist, as HMRC does not grant its approval to umbrellas.

It’s also true that these types of ‘brollies’ have always been a problem but right now, with the cost-of-living crisis putting an additional squeeze and pressure on household incomes, it’s creating a situation that they are attempting to take full advantage of.

Hard-pressed due to the current climate, to some workers these schemes might look appealing.

A few contractors are asking for trouble

Yet not everyone is a mark. Although many contractors falling foul of these schemes are very innocent, there are some that are actively choosing umbrella companies that they know are not fully compliant. This is a huge risk as those that know the potential downsides really are playing with fire and won’t have anyone’s sympathy.

The fact it would be them as the party fully liable for the tax they owe to HMRC – sometimes even many years later – is important to remind these individuals of. Indeed, what contractors often think or get told will be saved in tax on their take-home pay, can later get more than wiped out by the tax bill.

Get in touch with us today to speak with a specialist Contractor Mortgage Advisor.

What should contractors look for?

HMRC are trying to close loopholes and do publish an official list of avoidance scheme firms that contractors should not work with. That said, this resource is by no means a comprehensive list.

However, contractors should be aware that because of UK laws under the Finance Act 2021, after 12 months, entries on the list must be removed. This is a huge problem as the removal risks giving contractors the wrong idea. My hope is that this 12-month expiry in the legislation can be re-looked at by HMRC and corrected by HM Treasury.

Something else we’d advise contractors to look out for? Accreditation by the Freelancer & Contractor Services Association. This is one of the gold standards in the umbrella employment sector, and firms with an FCSA badge are showing that they are serious about compliance. My take on being an FCSA member is that it’s definitely a trust signal worth factoring into any decision-making you do as a contractor.

However, FCSA is a membership body, and there is still no government-led regulation of the umbrella sector. Regulating umbrella companies is something we believe is still very much needed and would be very welcome.

How should contractors approach umbrella companies in 2023?

Working through the complexities of all of this is very difficult for contractors to navigate, with lots of factors to consider. My recommendation is that you really take the time to decide which PAYE umbrella company provider to work with; do your research carefully, and don’t be afraid to ask lots of questions.

Start by asking your agency whether they have a PSL in place; what due diligence they have carried out and whether their providers have any kind of compliance accreditation or audit standard.

Next, speak to those partners, review your Key Information Documents and any additional take-home pay illustrations or breakdowns you are given by your prospective payroll company. If you are already working through one, there are good companies out there that can check your payslips in real-time to ensure everything looks legitimate and as it should be.

Be in no doubt, there are many good umbrella companies out there that will give you the support you need while contracting. However, it’s important that you avoid companies that can’t explain why your take-home via them is higher than normal (the only difference between compliant providers is the margin), or how they can afford to pay you for ‘free’ and those who can’t provide you with illustrations and payslips. If you’re stuck or still unsure, the FCSA website is a good place to start as members are regularly audited to ensure compliance.

Final thought

Bottom line? There’s no such thing as a free lunch, and no such thing as a free payroll service that won’t come back to bite you! If your take-home is similarly too good to be true then, to avoid a nasty tax bill later down the line, take stock and look instead for a compliant and trustworthy payroll solution. When it comes to managing your personal tax contributions and ensuring compliance with HMRC, do it right first time with an umbrella company that doesn’t need gimmicks, to ensure potentially devasting tax consequences for you — and you alone — are avoided.

By Emma Naylor

Source: Contractor UK

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Why being self-employed isn’t a barrier to mortgages at 50 or 90

It is generally thought that if a person is self-employed, their mortgage options are limited. And if that person is also aged 50 to 90+, those options become even narrower. Of people we surveyed in their 50s (of all professions), only 4% had any idea they could get a mortgage. For those in their 80s, it dropped to 2%.These are shocking statistics because nobody is ever too old to get a mortgage they can afford, including the self-employed. All it takes is a lender with a can-do approach.

At LiveMore, for example, our mortgages are designed to help people aged 50-90+, including those who are self-employed. We have no maximum age for self-employed, but instead look at occupation and plausibility.

Get in touch with us today to speak with the UK’s Best Contractor Mortgage Broker.

Solutions needed for a huge part of society

It’s surprising that mortgage applications are so challenging for such a significant sector of society in terms of sheer numbers. There are around 4.3 million self-employed people in the UK, and the largest proportion of them – 1.8million – are aged 45-54. Almost 1 million are aged 55-64, and nearly half a million are 65+ *. If they can afford a mortgage, why do lenders make it so tough for them to get one?

Lenders willing to show a can-do attitude can not only reach a large base of great customers, but also make a huge difference in many lives.

Get in touch with us today to speak with a specialist Contractor Mortgage Advisor.

Helping the self-employed aged 50 to 90+

Flexible criteria is essential to helping the self-employed, including the newly self-employed who face a tough time in the mortgage market at any age. That’s why at LiveMore, we can consider applicants with one year of self-employed figures.

This can be a lifeline for anybody who went self-employed during the pandemic. It’s also helpful for people who used the Government’s Self-Employment Income Support Scheme (SEISS), which can go against them in some lenders’ eyes, but a lender that manually underwrites each case should be able to find a way forward.

At the same time, the Covid pandemic affected many self-employed people who were unable to work during the lockdowns, meaning their income might have been lower than in a typical year.

For example, one of our customers, aged 58, wanted to remortgage to buy out his ex-partner and move on after their divorce. But his self-employed income had reduced dramatically because of COVID.

Every high street lender turned him down. However, we considered what his income was likely to be post-covid, based on his previous track record, as well as accepting other income he had in the form of health and grant payments from the Government.

When our can-do approach helped him, he said: “LiveMore saved my life.”

Like this customer, who has various income sources, many self-employed people find income is an issue when they approach lenders who deem the case to be too complex.

However, if a lender considers all forms of income, mortgages often become affordable for many self-employed who may have thought they were running out of options. For example, we’re open to contractor’s income, and we’ll consider day rates or the previous year’s earnings.

The self-employed sometimes have foreign income, which many lenders will not accept but this is where it’s important for an intermediary to know their lender, as lenders like LiveMore will still accept overseas income, as long as it’s not the main source of money coming in. We can also consider net profits or retained earnings in limited companies as well as dividends, even when the borrower is no longer working.

So, whatever the profession of your self-employed clients, they may be more eligible for a mortgage than you think. We welcome most income and property types, and we always look for ways to say yes – even in ‘not your average’ cases.

By Phil Quinn

Source: Best Advice

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Accountants ‘worth the money’ for self-employed brokers ‒ analysis

Brokers have emphasised the importance of getting a tax return completed as early as possible, and argued that quality accountants are worth the expense.

With the end of the 2022-23 tax year last week, self-employed workers across the UK can now start to think about completing their tax return.

And brokers told Mortgage Solutions that it is important for self-employed advisers to do this as soon as possible, with one completing their return as soon as the new tax year had begun.

Getting off to a positive start

Samuel Gee, director at Manning Gee Investments, explained that he used to be complacent about his tax return, leaving it until the last minute and feeling stressed about the process.

“But this year I decided to take a different approach and tackled it before 7am on the first day of the new tax year. By being proactive and getting the task done early, I was able to avoid the stress and worry that often come with tax season,” he continued.

Gee added that he has always done his return himself “as it’s fairly simple”, though he has help on hand from those with greater tax insights if needed.

Jamie Alexander, mortgage director of Alexander Southwell Mortgage Services, said he has always submitted his tax return as soon as possible, admitting he has “never understood the mentality of submitting them the following January”.

He added: “I would prefer to know my exact bill as early as possible to prepare for it. I use an accountant who points me in the right direction and provides me with the estimated bill from May.”

Scott Taylor-Barr, financial adviser at Carl Summers Financial Services, explained that his business is run through a limited company, so his personal tax returns are not completed until the year-end of the limited company.

He added: “I do push my accountant to get them done as soon after that as possible; when I was a sole trader I would always get my tax return done as soon as I could after the end of the tax year too, so I can get as much prior notice as to the amount I need to pay by 31st January the following year. No one likes a surprise tax bill bigger than they expected, or have saved for.”

Get in touch with us today to speak with the UK’s Best Contractor Mortgage Broker.

Leaving it late

But not all brokers are so determined to get their returns sorted swiftly.

Jane King, mortgage adviser at Ash-Ridge Private Finance, admitted she was terrible with her tax return, constantly putting it off to the point that it is often submitted on the 30th January.

However, she noted that as her accounts “are very simple and straightforward” it only takes half a day to put them together.

The benefits of an accountant

Anil Mistry, director of RNR Mortgage Solutions, said that as a limited company, he needs to obtain two sets of accounts: one for the business, and another for personal use.

As a result his accountant has historically deferred completing them both until the final month of the year.

He continued: “In my role as a broker, I find it helpful to have a comprehensive breakdown of my company’s expenditures, categorised by area. This allows me to identify areas where costs can be reduced or budgeted for in the future. I have even asked my accountant to establish new criteria on Dext, such as marketing, advertising, and coaching, to streamline this process, and know what is being spent where.”

Andy Wilson, founder of Andy Wilson Financial Services, said that his return is prepared by the firm’s accountants as part of a bundle of services provided.

He explained: “The returns are submitted on our behalf, after checking and our approval, at the same time as the business accounts are prepared and signed off. This will usually be around July each year. This is because our network requires the finalised accounts as soon as possible. I never allow this to be last minute as it would stress me out.”

Wilson also emphasised that while accountants are not cheap, they do provide brokers with peace of mind. “In 12 years, I have never had a single query from HMRC as a result of their diligence,” he added

Get in touch with us today to speak with a specialist Contractor Mortgage Advisor.

Accountants save more money than they cost

James Miles, director of The Mortgage Quarter, said that as a broker he can see first hand how important it is to get your accounts in order ASAP and be ahead of the curve so that you can submit your tax return.

He continued: “Despite being surrounded with numbers constantly I’d be naive to think I’m the best person to be submitting my own returns. With tax laws changing every year and allowances bouncing around as much as the stock market, use a professional accountant. It’s a must and I have no doubt they’d save you more money than their cost.”

And Taylor-Barr highlighted the value provided by quality accountants, noting that not only can they ensure that the return is done correctly, they can also highlight potential savings or allowances you were not aware of.

By John Fitzsimons

Source: Mortgage Solutions

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Self-employed saw unaffordable loans jump by a third after mini-Budget: MBT

Mortgage enquiries from self-employed applicants who failed to find an affordable loan jumped by almost a third following last September mini-Budget, data from Mortgage Broker Tools shows.

The criteria platform says that prior to the tax-cutting fiscal event by former Chancellor Kwasi Kwarteng, 28% of mortgage enquiries from self-employed applicants were unable to achieve the loan size requested as they were considered unaffordable.

But after the mini-Budget, this number lifted to 37% of self-employed home loan enquiries that were considered unaffordable by lenders.

Get in touch with us today to speak with the UK’s Best Contractor Mortgage Broker.

Current Chancellor Jeremey Hunt reversed almost all of Kwarteng’s tax-cutting measures, which had caused UK borrowing on international money markets to rise in October and his Autumn Statement in November, calming rates. The Chancellor presents his full Budget on Wednesday (15 March).

“In recent weeks, competition has returned to the market, with lenders cutting rates and offering more achievable stress testing,” adds the criteria platform.

Get in touch with us today to speak with a specialist Contractor Mortgage Advisor.

Mortgage Broker Tools chief executive Tanya Toumadj says: “As we saw from the mini-Budget last autumn, fiscal policy statements can have a significant impact on financial markets, interest rates and ultimately the accessibility of mortgage finance, so we’ll all be watching closely to see what the Chancellor has to say at the dispatch box.

“It’s unlikely that this Budget announcement will have quite such a dramatic impact on mortgage affordability, but even small changes can have a potentially huge impact on the prospects for individual clients, particularly in the current uncertain economic environment.”

By Roger Baird

Source: Mortgage Finance Gazette

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Resilient UK tech companies ‘making hay’ from distressed sectors

The UK’s challenging economy, with its strikes, covid hangovers, cost of living crisis and shortages, is clearly troubling tech companies the least.

And more than just shrugging off the challenges, firms specialising in IT and software might even be benefitting from the difficulties which other key sectors are suffering.

SFP Group, a company rescue and MVL specialist, insolvency house Opus Business Advisory Group, and Integro Accounting issued this two-fold analysis to ContractorUK.

‘Highly confident’

Issued on Friday, the analysis is based on a study by Integro, a contractor accountancy firm, showing 89% of tech firms as “highly confident” they can ride out the next quarter.

The finding represents the strongest show of tech company confidence for three years, given 79% and 76% said the same in 2021 and 2020 respectively.

And the high confidence was in contrast to companies in the other polled sectors.

Similarly on sales, more than half (53%) of IT consultancies said they felt their performance would improve during the rest of 2023. Only two per cent forecasted a dip.

‘Covid benefitted tech sector, to the detriment of others’

By contrast, not even a third of housebuilders anticipated an uptick, which was echoed by pubs (not even 20% foresee an increase) and retailers (more than 40% foresee a decrease).

“Covid…accelerated market shifts that have outlasted the pandemic, which has been to the benefit of much of the UK’s tech sector but to the detriment of other sectors”, said Integro’s Christian Hickmott.

Even subsequent to covid, industrial action in the transport sector which is “damaging” retail, leisure and hospitality outfits has “been a boon” for many tech firms.

Get in touch with us today to speak with the UK’s Best Contractor Mortgage Broker.

‘IT contractors insulated’

Integro’s boss, Mr Hickmott explained his assessment: “There had been a drift back to pre-pandemic working practices, but with transport disruption ongoing, more organisations are entrenching remote working and the associated technology. And this looks set to continue for the foreseeable future.”

Yet it is not only large or established providers that are the tech sector’s unfazed, as individual IT contractors are also often “insulated” from the disruptions, says Opus.

“With low start-up costs and overheads, [and] an ability to work remotely, in most cases, IT consultants stand to be some of the biggest winners from the current difficulties,” says the advisory’s Gareth Wilcox.

In a statement to ContractorUK, Wilcox spoke of “continued demand” for such small, tech-led enterprises from an “economy increasingly forced to diversify, streamline and digitise.”

‘Bruised and battered’

As to those sectors feeling force and pressure, SFP Group said that on top of hospitality, the “bruised and battered” were in the haulage, manufacturing and construction sectors.

“The IT sector appears to remain robust [however],” SFP Group’s senior consultant Patrick Hogan told ContractorUK.

“That may be because, in simple terms, almost anything that businesses do today have a strong IT bias and if you do not keep up with the rapidly evolving technologic advances, you could find yourself being left behind”.

At Integro, Hickmott confirmed “businesses are continuing to invest in digital transformation projects to drive productivity gains”.

The accountancy boss calculates that the gains are being sought as a way to ‘lessen the impact of inflation,’ and the investment will “boost” IT skills-demand further.

‘Inflationary pressures’

But it’s not all plain sailing for technology-focussed companies.

The Integro poll found that more than four in ten IT-led firms have had to absorb the costs of price increases, rather than pass them onto clients.

With only 17% succeeding at passing inflated costs on to customers, “inflationary pressures are clearly having an impact on the overheads of IT businesses,” the firm said.

Get in touch with us today to speak with a specialist Contractor Mortgage Advisor.

‘Costs and shortages possibly yet to peak’

Another barrier to growth – skills shortages – continues to impede technology businesses too, but according to the study, potentially to a lesser extent.

In fact, the chunk of tech business not suffering from a shortage of workers they need has expanded by five per cent, from 62% at the end of 2021 to 67% currently.

“Covid has retreated for now, [but] many other challenges around rising costs [and] labour shortages…persist and are possibly yet to peak,” cautioned SFP Group’s Mr Hogan.

“This does unfortunately mean more challenges ahead for many businesses.”

‘Making hay while the sun shines’

But Integro points out that strong demand for software and IT services puts tech firms in a “relatively stronger position” if they can get clients to the negotiation table on prices.

At Opus, Wilcox recommends acting sooner rather than later:

“Given the difficulties being felt elsewhere in the economy, it could be a case [for tech companies] of making hay while the sun shines.

“[After all,] the strength of companies [including those which were polled] is often defined by their current contract,” he said. “And inevitably, contracts will be up for renewal at some point”.

A tad more optimistic is SFP’s Mr Hogan, who reflected: “It is [clearly from these findings] not all doom and gloom. Indeed, as insolvency practitioners, it is true that we rarely find ourselves dealing with distressed tech operators. That surely must tell a compelling story about the strength of the IT sector.”

By Simon Moore

Source: Contractor UK

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There is still appetite for lending in the housing market, says top property lawyer

Without a doubt, 2022 was a turbulent year for the UK housing market. House prices may have hit record levels, but the Bank of England created havoc. By December, the base rate had been increased nine times over the previous 12 months, depressing market activity and putting the brakes on property prices.

According to optimists, there will not be a price crash but a soft landing thanks to a 25% fall in mortgage rates over the course of this year. They argue that forbearance measures from big lenders will help struggling borrowers as they switch to interest-only or competitive fixed-rate deals without the need for affordability tests. Since nearly two million people will need to re-mortgage as their fixed-rate deals expire in 2023, this will cushion the blow and reduce the volume of distressed/repossession sales.

Inflationary pressures and a fiscal squeeze have made mortgages unaffordable for many people relative to their incomes. Average UK house prices are now eight-times average earnings, according to Schroders. In London, the ratio rises to 11 times. Nevertheless, the economic mood is gradually moving away from ubiquitous gloom. For example, as the leading indicator of where corporate earnings are headed, UK equity markets have been back on an upward trajectory since November 2022.

A notable shift in sentiment can also be seen in reduced rates for two-year and five-year fixed mortgages: after spiking at 6.5% last October, they have now fallen back towards the 4.5% mark. For potential buyers, interest rates matter because they affect both affordability and lenders’ willingness to lend.

Get in touch with us today to speak with the UK’s Best Contractor Mortgage Broker.

Several commercial retail lenders such as Santander, Barclays, Nationwide, and Halifax have recently announced mortgage rate reductions to an average of around 4.5%.

When big commercial lenders cut rates, the market becomes more attractive and more affordable for domestic buyers, particularly first-time buyers – and not just to overseas or domestic cash buyers as happened when rates recently spiked. Notwithstanding the media hype about banks planning to reduce their mortgage lending, they still have plenty of appetite to lend.

The market has now fully digested everything that happened during the past year, including the “new normal” level of interest rates. These increases are now priced into people’s thinking, enabling industry professionals to advise with renewed confidence about where rates might be heading.

Get in touch with us today to speak with a specialist Contractor Mortgage Advisor.

History shows that whenever the UK property market is reportedly down, it does not stay down for long. Good properties are not always available: in busier markets, people often lose out because of increased competition, so buyers with available funding should press ahead on properties they really want.

But there is a caveat: incomes will need to rise in real terms in order to increase domestic buyers’ purchasing power. Without that boost, the market may still be more attractive and affordable to overseas and cash buyers.

By Goli-Michelle Banan

Source: Today’s Conveyancer

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Despite interest rates rising to 4%, mortgage opportunities abound for contractors

It’s always darkest before the dawn, or so historian Thomas Fuller would have us believe. Despite him coining that phrase in 1650, it’s so apt for the mortgage market right now, in 2023!

Yes, the Bank of England recently raised the base rate to 4% (from 3.5%) in its fight to bring inflation under control. But in contrast, strong competition among lenders to attract new business early in 2023 implies positive indicators of recovery.

Why the focus on variable rates has skewed our focus

To date, commentators have placed too much emphasis on lenders’ standard variable rates (SVRs) reaching 6-7%. SVRs have traditionally been short-term solutions, with many borrowers typically sitting on them until better rates become available.

But the majority of borrowers in the UK aren’t on SVRs! They’re on fixed-rate mortgages and need only really concern themselves with SVRs when they need to remortgage.

To that end, increasing numbers of options provided by keenly-priced products are appearing for borrowers. We’re now seeing lenders offer fixed interest rates at under 4 %, and they’re still coming down!

How has the mortgage market reacted to the BoE interest rate rise?

From what we’re seeing, the market has hardly flinched since the bank’s decision on February 2nd to raise the base rate by half a per cent.

The market wholly expected this most recent rise to 4% — being the tenth in succession. But from that most recent vote, there are signs of opinion changing on the bank’s Monetary Policy Committee (MPC).

Two members now believe the base rate is too high. One MPC member, Silvana Tenreyro, reportedly told the Treasury Committee:

“It took time for changes to the bank base rate to feed through to the real economy and so far, just a fifth of the impact has been felt”.

Tenreyro now believes that monetary policy is doing enough to meet the BoE’s aim of bringing inflation down to its target rate of two per cent, hence her vote against the latest rise.

Get in touch with us today to speak with the UK’s Best Contractor Mortgage Broker.

Interest rates may rise further yet — but one bump, or two?

Many mortgage brokers support Tenreyro’s stance, including me. Monetary policy was doing enough to meet the aim of bringing inflation significantly down. Unless another big global shock happens, many chief economists believe a fall in inflation is guaranteed. Eventually.

Even so, two out of nine is still a minority (on the MPC). As such, the financial markets’ expectations are that the BoE base rate may yet rise to 4.5 per cent, but maybe as a result of 2 0.25% increases, rather than a single .50% rise.

What’s actually happening on the ground?

Even before the BoE announced the latest raise, lenders had already taken strides to factor it into their rates.

The Feb 2nd decision will, however, see the cost of borrowing increase for borrowers on SVRs and tracker mortgages across the UK. But fixed-rate mortgages will remain, to a greater extent, unaffected.

There are already signs that the worst is past. The market has picked up again; buyers and sellers who delayed remortgaging when rates were highest are jumping on current rates.

What we’ve seen over the past few weeks is a raging price war between lenders with fixed rates falling daily. And this week, we saw the first re-introduction of sub-4% fixed rate deals appear (since September 2022).

Mortgage rates were already on a downward path late last year following the turmoil of September’s mini-Budget. This trend has continued since and has trickled into February.

One reason for the trend is that medium-to-long-term swap rates, which factor heavily in determining mortgage rates, have continued to improve. This movement has given lenders greater confidence, and has resulted in the more competitive fixed-rate mortgage products our contractor clients are now taking advantage of.

Get in touch with us today to speak with a specialist Contractor Mortgage Advisor.

A new norm…

For those of you wondering if now’s the right time to pounce on your property of choice, let me just reiterate what I said last month. We are categorically not going to see fixed-rate mortgages priced at sub-2%.

In truth, we’ll be lucky to see sub-3 % rates return, even if inflation reaches its 2% target. The general consensus among brokers is a gentle optimism that mortgage interest rates will settle between 3.5% to 4.5%.

It’s a similar story with house prices. It was obvious we’d see a correction following the turbulence and uncertainty late last year. But much of this has already happened, and we’re not (and never were) going to see the 20% crash in housing stock that many ‘experts’ predicted.

All this means that if we’re not at the ‘new normal’ already, we’re not far away from it (failing another global disaster landing).

Neither house prices nor mortgage rates look likely to drop off a cliff any time soon, so contractors – you can proceed with a level of impunity we’ve not seen in a while.

Final thought

The caveat is, as always, what’s best for you will be determined by where your current rate and fixed-term mortgage are now. For specific advice, talk to your specialist broker about your aspirations, and take it from there. We’re happy to have that conversation with you.

By John Yerou

Source: Contractor UK

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Conservative MP calls for Sunak to reverse IR35 reforms

Conservative backbencher Sir John Redwood has called for Prime Minister Rishi Sunak to reverse the “very bad deal” IR35 is bringing to self-employed workers.

Appearing on Sky News over the weekend, Redwood said: “I think, first of all, the self-employed are getting a very bad deal.

“I think we should reverse the 2017 and 2021 changes to so-called IR35. We want to promote more self-employment – make it easier for people to get into self-employment.

“That is the quickest way to expand capacity.

“Then I think we need to look at business taxes. I don’t think the Corporation Tax delayed increase will raise the money The Treasury and the OBR think it will.

“All the evidence is, in the past, when Conservative governments have had the courage to cut the Corporation Tax rate – never a popular move – it raises more money.”

Get in touch with us today to speak with the UK’s Best Contractor Mortgage Broker.

The highly controversial changes to off-payroll working tax rules came into force in 2012, with a year’s delay due to Covid-19.

The legislation mans medium to large-scale businesses are responsible for determining the IR35 status of contractors they hire.

The reform was set to be repealed as part of the mini-Budget in September 2022, before the plans were abandoned by new Chancellor Jeremy Hunt.

IR35 insurer Qdos has welcomed calls from Sir John to reverse the off-payroll working rules,

Get in touch with us today to speak with a specialist Contractor Mortgage Advisor.

The he firm’s chief executive, Seb Maley, said: “Millions will welcome Sir John Redwood’s comments. Whichever way you look at it, IR35 reform has damaged flexible working in the UK,” Mr Maley said, “It’s made it harder to work self-employed and harder for businesses to engage these workers – at a time when the economy desperately needs the skills and flexibility of independent workers.

“Rishi Sunak himself saw through IR35 reform in the private sector when Chancellor. So he’s no stranger to this legislation, nor the challenges it has created. Reversing IR35 reform would be the fair and logical thing to do.

“However, when it comes to IR35, the government has anything but fair and logical. Its head has been buried in the sand for years.”

By Ryan Duff

Source: Energy Voice

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Five reasons why HMRC’s IR35 report has been criticised

An HMRC report on how IR35 reforms have impacted contractors has attracted criticism.

Read on to find out what the report said about IR35 and why it’s been accused of being ‘wide of the mark’.

HMRC report – what were the key findings?

Published in December, the HMRC report was based on a telephone survey of 353 businesses with 39 follow-up interviews.

Here are some of the key findings:

  • 130,000 workers are likely to have been affected by off-payroll reforms in April 2021
  • IR35 reform generated an additional £1.8 billion in tax revenue between October 2019 and March 2022
  • businesses employing contractors incurred an overall one-off cost of between £90 million and £230 million to implement the reforms
  • they spent a further £150 million to £370 million between April 2021 and April 2022
  • the number of workers affected by IR35 reform makes up 2.5 per cent of the total self-employed workforce

What happened to contractors affected by IR35 reform?

According to HMRC estimates, the majority of contractors impacted by off-payroll working reform have become an employee of a business that isn’t their own freelance company.

It suggests that approximately three per cent have continued to work for their own freelance company having been deemed ‘employed for tax purposes’ by the business they work for.

Of those who have become an employee of another organisation:

  • 65 per cent have moved to organisations which aren’t agencies or umbrella companies (which could include becoming an employee of a client)
  • 20 per cent have moved to an umbrella company
  • 15 per cent have moved to an agency

Get in touch with us today to speak with the UK’s Best Contractor Mortgage Broker.

Do businesses still work with contractors post-IR35 reform?

HMRC’s research suggests that 41 per cent of organisations surveyed now work with fewer off-payroll contractors than they did in March 2020.

Meanwhile, 35 per cent said they hired the same number of off-payroll workers and 23 per cent said they’ve taken on more since IR35 reform.

The survey also found that 47 per cent of businesses worked with the same number of off-payroll contractors in September 2021 than in March 2020.

Five reasons why the HMRC report has been criticised

A number of off-payroll working experts and commentators have criticised the government’s report, according to publications like Contractor UK and The Register.

One commentator said the report was ‘wide of the mark’, while another said the findings should be taken with ‘a pinch of salt’.

Here are five reasons why it’s attracted a negative response:

1 . Could contractors be paying unnecessary taxes?

Many of the 130,000 workers who have moved to payroll since the reforms may have incorrectly been categorised as inside IR35, meaning they are now paying tax they shouldn’t be.

Matt Fryer, Managing Director of Brookson, said that the HMRC research should have included findings on incorrect determinations or status determination statements.

“HMRC seems keen to highlight that this represents just 2.5 per cent of the total self-employed workforce, and less than one per cent of the total workforce. Is this an indication that the government is content with the unfairness of this outcome?,” he said.

2 . Timing of research doesn’t paint ‘accurate picture’

By focusing on the period between March 2020 and September 2021, the research failed to give an accurate indication of the before and after scenario, according to Dave Chaplin, CEO of IR35 Shield.

This is because most businesses had already changed their working practices as the delay to off-payroll working reforms was announced just three weeks ahead of the original deadline in April 2020.

“Choosing March 2020 as the baseline is somewhat of a statistical howler and means the report paints a less disruptive picture than what occurred in reality,” Chaplin said.

3 . Underestimating the upheaval of IR35 reform

The HMRC report fails to tell the story of the impact of changing off-payroll rules in 2021, according to Seb Maley, Chief Executive of Qdos:

“Read this report and you’d think that the off-payroll rules have been plain sailing.

“We’re…told that half of businesses have found it ‘easy’ to comply with the off-payroll rules, and that around eight in ten firms assess IR35 status on a case-by-case basis.

“These statistics paint a nice picture, but I would take them with a pinch of salt. True, more businesses are getting to grips with these rules, but it’s been a difficult journey.”

4 . HMRC should have spoken to contractors and accountants

A former HMRC employee and now Co-Founder of Bauer & Cottrell, Kate Cottrell said the findings were “questionable” due to a lack of perspectives.

She commented: “To make this research have any value, you cannot limit it to asking just one party that has been affected by IR35 reform, even if you are only seeking short-term effects.

“For starters ask contractors how easy it was for them; ask all the accountants how many contractors they have lost and ask all the umbrellas how much new business they have gained.

“Ask the agencies how their client and contractor bases have changed; ask all the trade bodies, insurance providers and accountancy institutes how IR35 reform has been for them.”

5 . A pool of survey respondents that was too small

Cottrell went on to criticise the number of respondents to HMRC’s survey.

She said there should have been evidence from “tens of thousands of real-life experiences” instead of 353 calls and 39 follow-up interviews.

“It really is time for some balance, to seriously establish the short-term effects and of course the longer-term ones right up to the present day,” Cottrell commented.

“A key question is how much HMRC has spent on it all. Noticeably absent from this report, I suspect it will be an astonishing amount,” she added.

Get in touch with us today to speak with a specialist Contractor Mortgage Advisor.

HMRC responds to IR35 criticism

Responding to the negative comments about its study, an HMRC spokesperson said: “This reform has succeeded in improving compliance with the off-payroll rules, with more people who work like employees paying tax like employees, levelling the playing field.

“It is nonsense to assert that most businesses had changed their workforces by March 2020. Our analysis shows only 20,000 of the 130,000 workers identified who changed the way they work due to the 2021 reform had done so by March 2020.”

By Conor Shilling

Source: Simply Business

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Mortgages for the self-employed

Securing a mortgage may be more of a challenge if you’re self-employed (e.g. running your own business, or freelance).

Self-employed income is often less predictable and may also be less secure than a salary, so mortgage lenders need more reassurance that you can afford your monthly repayments in the long term.

You may therefore need to prepare more carefully if you’re self-employed, so that your mortgage application isn’t rejected.

Bear in mind that every rejected application can harm your credit score and make the next one more difficult, so give it your best shot the first time.

The self employed mortgage – busting the myths

You may have heard the phrase ‘self-employed mortgage’, but the truth is there is no special type of mortgage deal for self-employed people.

In principle you have the same choice of mortgages as a salaried applicant, although depending on your personal circumstances you may be offered a more limited range of deals, and may also face more stringent checks.

Get in touch with us today to speak with the UK’s Best Contractor Mortgage Broker.

Tips on mortgages for the self employed

Here are some guidelines for applying for a mortgage if you are self-employed, and how to maximise your chances of securing a good deal.

Can your spouse take the lead on the mortgage?
It might sound obvious, but if your spouse is salaried rather than self-employed, it can make more sense for them to be the first name on the mortgage, as their application may be more likely to be approved.

Even if their income isn’t quite as much as yours overall, the fact that it’s regular and predictable may count in their favour. Ask your mortgage broker about this option.

Show at least two years of accounts
In most cases you’ll need to provide at least two years of recent accounts – the most recent can be no more than 18 months old.

Hire an accountant to ensure the accounts meet the required standards, and ask him or her to explain the accounts to you in detail so you can speak confidently about them if questioned.

Some lenders ask to see an SA302 form (a confirmation from HMRC of the income you’ve reported to them) either instead of or in addition to your accounts.

These can take a few weeks to arrive, so request them in good time. You may also be asked to show some recent tax returns.

Increase your income if you can
When running a business, usually it’s good practice to retain as much profit as possible within it.

However, you may want to make an exception when trying to secure a mortgage.

Paying yourself a higher dividend of the profits can boost your application, and should also enhance your savings so you can afford a larger deposit.

Once you have your new home, you can readjust your income if you wish, so long as you can still afford the repayments and other outgoings.

Postpone major business changes
Lenders look for stability, so it may hinder your chances if you’ve only recently changed the structure or type of your business (e.g. from a sole trader or partnership to a limited company).

If you don’t want to delay that change, then give the new business structure time to bed down so that the lender can have confidence in it.

Make sure your lender is aware of the type of business structure you have, so they fully understand your level of income and how you receive it.

Get in touch with us today to speak with a specialist Contractor Mortgage Advisor.

Be aware of the deposit bands
This tip is useful for all mortgage applications, but it can make an even bigger difference when you’re self-employed.

A larger deposit always means lower repayments, but there are also bands above which rates become even cheaper (typically 10 per cent, 25 per cent and 40 per cent deposit).

If you’re close to one of these bands, see if you can raise just a little bit more money to get past it – it’s usually worth the effort.

Remember that lenders often have different criteria
Why would one lender say ‘No way!’ and another say, ‘No problem!’? Because they may consider your earnings in a different way and take different income into account.

For instance, Lender A might focus on salary and dividends, while Lender B may base their decision on your operating profit and retained profits.

So if you get turned down by one, don’t despair – another lender may say yes without any changes to your income.

It’s good to consider this before you apply, to avoid the knock-back of a rejected application, so ask your mortgage broker to find the lender most favourable to your position.

Use a specialist self employed mortgage broker
Find a mortgage broker who has a lot of experience in finding mortgages for self-employed people.

A specialist can anticipate problems in advance and also source the most likely lenders for you from the whole of the market.

This reduces the risk of having your application declined. Although one declined application is unlikely to harm your credit score by much, a series of them might.

Seeing an adviser maximises your chances of being approved first time.

By Nick Green

Source: Unbiased