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Just Mortgages launches marketing service for brokers

Just Mortgages has launched a white-labelled digital marketing package for self-employed brokers.

The service is aimed at brokers who want to promote their own trading style and brand.

Carl Parker, national director of the self-employed division of Just Mortgages, described the offering as a full-service marketing solution, with the group aiming to match the level of service provided by a dedicated marketing agency.

Get in touch with UK Contractor Mortgages today to discuss your Buy to Let & Residential Mortgage requirements.

Self-employed brokers will have access to in-house marketing professionals, who are also experts on the subject of mortgages, and will be offered branding and logo development, content creation and social media support.

An initial consultation between the broker and the marketing team is followed by a brand set up with logo and brand guidelines to establish the look and feel of the business, as well as website and social media content in line with financial promotion regulations.

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On-going support is then provided to the broker to help raise their business profile and attract new clients, according to Parker.

“Our aim is to provide the best possible showcase for the brokers’ business while they get on with the important job of helping clients with their mortgage and insurance needs,” he said.

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Figures from IBISworld show there are 5,580 mortgage broker businesses in the UK in 2022, an increase of 2.6 per cent from 2021.

Last week, Just Mortgages also announced a new training initiative for those wanting to become mortgage and protection advisers.

By Jane Matthews

Source: FT Adviser

Contractor mortgage broker Contractors IR35 rules
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High inflation boosted IT contractor jobs market in May 2022

High inflation appears to have boosted the less quickly growing IT contractor jobs market, as the slowdown in growth in temporary technology billings paused in May.

In Report on Jobs, the REC suggests that rising costs made employers scrutinising the bottom line turn to temps rather than add members of staff to the payroll on a full-time basis.

REC chief executive Neil Carberry gave this assessment in the report on Friday, potentially part explaining how demand for IT contractors shot up in May to 66.1 from 63.7 in April.

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‘Inflation-induced caution’
Mr Carberry said: “The market for temporary work is stabilising faster than for permanent staff, which could suggest a little caution creeping into employers’ thinking in the face of high inflation.”

Kate Shoesmith, the Recruitment & Employment Confederation’s deputy CEO returned last week from a hiring expo in Brussels, only to similarly acknowledge inflation’s tight grip.

“We have been through tough times [chiefly due the coronavirus pandemic], followed by record-breaking successes. But the economic headwinds are [still] there,” she said.

‘Rethinking growth plans’
As to inflation’s effects, Claire Warnes of KPMG spoke of employers “starting to rethink their growth plan” as — like candidates — they face ‘the greatest costs in recent years.’

“And these are expected to increase, at least in the short term,” said Ms Warnes, KPMG’s head of education, skills and productivity.

As well as “rising business costs” for both candidates and end-users alike, she sounded more sympathetic to the latter, by pointing out organisations also face “supply chain disruption.”

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‘IT Operations and Helpdesk keeping pace with inflation’
But only last week, Indeed said that as “the economy starts to weaken,” the phenomenon of “soaring inflation” was eroding the pay gains of “most” workers.

The jobsite found exceptions though – seven occupations in total, including IT Operations and Helpdesk where pay has climbed by a healthy 7.1% in the 12 months to April 2022.

“A handful of occupational categories are seeing wage growth keep pace with inflation, largely the ones facing the most acute hiring challenges”, said Indeed’s Jack Kennedy.

The jobsite’s economist, he added: “Employers in these sectors are having to raise pay to deal with the combination of high vacancies and falling relative jobseeker interest.”

‘Hot market for the sector-qualified’
Compounding the situation, candidate availability is falling too, the REC found in May, and one consequence is “it remains a hot market for those well-qualified in their sectors.”

But another consequence of lower candidate availability is frustrated recruiters.

“Jobs that are paying well for super companies = no applicants. No amount of hunting is getting responses. Very, very few if any candidates,” posted recruiter Roseanne Stockton.

Boss at Nu-Recruit, she added: “Candidates….are excellent. But in the main, up to that point [of meeting them], I cannot find many. [There are just] two candidates per job [opening] at the moment!”

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

‘None of their clients would touch a career-breaker’
However some recruiters aren’t helping themselves by excluding professionals who have CV gaps due to taking a career break.

The disregard of individuals with lives beyond just work disappoints agents like Kieran Boyle, owner of CKB Recruitment, who took to LinkedIn.

“Spoke to a candidate this morning [with] bags of experience, [but] taken nine years out to have children.

“The [candidate] was told by a rather well-known insurance recruiter that they didn’t want to work with her, and none of their clients would touch someone whose had a career break”.

“What a load of poppycock,” Mr Boyle continued online, reflecting in his own post. “The industry faces an unprecedented skills shortage, so why would you not try and help someone back into this amazing industry, and help one of your clients fill a role at the same time?”

‘Flexibility trumps pay’
The shortage in the IT sector in May was severe for Developers, Software Engineers, and IT and Technology generalists, as these four were scarce on both a permanent and contract basis.

No other IT contractor skills were “in short supply” in May according to REC’s member agencies, which struggled to find full-time applicants for Analysis, CAD, Data, Digital, Software and Technical Sales positions.

But the confederation has repeated its advice to employers that cash is no longer king.

“Flexibility [now] trumps pay, “ said the REC’s Ms Shoesmith. “[And that’s] closely followed by [company] culture in [terms of] candidate job search [preferences] right now.”

By Simon Moore

Source: Contractor UK

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Contractor sector sceptical of potential tax cuts from an under pressure Boris Johnson

Contractors being potentially among the one in three adults who can afford basics but not always luxuries isn’t making the contractor sector into Boris Johnson’s whispered tax cuts.

Reportedly recommended to the prime minister as a way to heal rifts after he narrowly survived a confidence vote, any tax cuts would usually be embraced by contractors.

After all, contractors are “up against IR35 reform, dividend tax rises and [potentially] an incoming hike to corporation tax,” Qdos’s Nicole Slowey pointed out yesterday.

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‘Token gesture’
But another specialist in contractor taxation, Graham Webber of WTT Consulting, says he expects any tax cut from Mr Johnson to be only a “token gesture”.

The PM’s trying political circumstances, plus the government’s tendency to legislate against contractors rather than incentivise it via tax cuts, makes his expectation creditable.

But in a thread featuring both the tax specialists, a Test Analyst said that if any of the tax cuts resemble Spring Statement’s 5p cut in fuel duty, the government can “keep it.”

‘Forced bribe’
“At this stage [from Mr Johnson], it would be a forced bribe,” said the analyst, a self-employed contractor. “It would only be announced to make Boris look better, not to help us”.

The prospect of tax cuts has prompted Mr Johnson’s most supportive national newspaper, the Daily Telegraph, to identify a fuel duty reduction as the most important of five he may make.

The right-leaning broadsheet said a close second would be for the PM to abolish the 5% VAT charge on heating fuels — as Mr Johnson has previously promised to do.

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‘Attacks on contractors’
Yet a consultant posted yesterday that it’s not ever Number 10’s decision to cut taxes – it’s Number 11’s.

“[Chancellor] Rishi [Sunak] and the Treasury are in charge of taxes, not Boris,” the consultant said.

“[Following the many] broken promises and attacks on contractors over the last few years, it will take a lot [for either Mr Sunak or Mr Johnson] to win back support — and trust.”

‘Government handling taxation badly’
A YouGov reading of June 2nd shows 69% of adults believe the government to be handling of the issue of taxation “badly.”

Income tax is the levy which people would least like to be increased by the government, followed by council tax, and then National Insurance, the pollster found in May.

Speaking since the findings, Keith Gordon QC has pinpointed what he would most like to see in relation to the contractor sector’s most notorious tax rule.

In a phone-in with LBC about the off-payroll rules, the tax barrister said: “I hope someone will go back to the drawing board and decide IR35 is not fit for purpose.”

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‘Unwelcome letters from HMRC’
A revoking of the Intermediaries legislation is even more of an outside bet than tax cuts from the prime minister, so accountants say it’s ‘business as usual’ this tax return season.

“With tax returns on the mind of many pro-active taxpayers, something often forgotten on the tax returns of those submitting early, is benefits-in-kind,” advises Adam Dove, senior client accountant at Orange Genie.

“With P11Ds not due for submission until July 6th 2022, it is important to ensure your employer has submitted your P11D and you have the details before you complete your self-assessment tax return, to avoid any unwelcome letters from HMRC with amendments, interest and, or, penalties.”

By Simon Moore

Source: Contractor UK

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Contractor mortgage broker underlines ‘get in quick’ advice, as approval times slow

A contractor mortgage broker is underlining its ‘get in quick’ advice of last week, due to a new and significant delay in how long lenders are taking to approve home loan applications.

Only on Thursday, Freelancer Financials explained that acting quickly to remortgage was key for contractors who want to mitigate the impact of future increases in the BoE base rate.

But now the broker says moving fast to lock-in a fixed rate is even more urgent, because lenders deciding to test borrowers’ resistance to the cost of living crisis is stalling approvals.

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‘Not just contractors’

“Mortgage applications are taking much longer to process due to lenders asking for much more information than before,” warns Freelancer Financials’ chief executive John Yerou.

“But this applies to everyone, not just contractors, as no matter who you are lenders want to accurately gauge people’s current and future living costs.”

An expert on contractor mortgages, Yerou says lenders are factoring such higher costs into their affordability calculations for customers, “which will make it more difficult to borrow.”

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‘Properties being down-valued’

But not all price tags are inflating — at least not in real-terms.

In a statement this morning, Freelancer Financials revealed to ContractorUK:

“In the past few weeks we’ve noticed that more of the lenders’ surveyors are down-valuing properties, because they don’t think they’re worth what buyers are prepared to pay.

“[Yet] we’re not expecting a sudden price reduction to hit the market, as right now, demand is still outstripping supply, which is likely to keep prices from dipping.”

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‘Bit more caution’

In the longer-term however, even in “the coming months,” the broker predicted that house price increases would “slow,” partly as buyers “exercise a bit more caution.”

Freelancer Financials added that the currently extended processing time to get a mortgage fully signed off means it won’t just be lenders ‘taking their time,’ but potentially buyers too.

By Simon Moore

Source: Contractor UK

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Self-employed mortgage guide – how to get a mortgage when you work for yourself

A self-employed mortgage is no different to any other home loan, but you may need to jump through a few more hoops to get one. You will have to prove your income (which can be more complex when you work for yourself) and have sufficient information (in some cases up to two years worth) to share with your mortgage lender.

If you can’t supply the required information, you may not be able to borrow as much, or may not be approved for the mortgage at all. There are specialist lenders available, but you may find that you are charged a higher premium as you are deemed a higher risk to lend to.

Get in touch with UK Contractor Mortgages today to discuss your Buy to Let & Residential Mortgage requirements.

Can I get a mortgage if I’m self-employed?

Yes, most lenders offer self-employed mortgages at the same rates and under the same terms as to employed borrowers.

If they usually lend up to a maximum of 4.5 times your income, for example, that doesn’t change just because you work for yourself.

Is it harder to get a self-employed mortgage?

It can be, because every borrower needs to prove their income to the lender to get the best mortgage rates. That can be more difficult if you’re self-employed, as your finances are often more complex.

There are many reasons the self-employed struggle to prove their income. Maybe you’ve had a bad year of trading, invested in your business (which has reduced your profits), or your company is new.

Mainstream lenders (such as high street banks) like to see a track record of self-employed earnings over two or three years. If your profits are variable or your income on paper doesn’t reflect what you can really afford, it can be hard to get the numbers to stack up.

If that’s the case, a lender may not offer you the size of mortgage you need.

Nick Morrey said: ‘In reality, it is more difficult for self-employed applicants due to the nature of how they are paid and taxed, and the documentation required to evidence their earnings. This complexity, compared to employed people, who can evidence their earnings by supplying payslips and bank statements, makes the process significantly harder.’

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Will I pay more for my mortgage if I’m self-employed?

Not necessarily. Providing you can afford the mortgage and prove your income in the way the lender requires, you have exactly the same access to mortgages as an employed borrower.

Many self-employed borrowers won’t encounter any problems.

But many others can’t prove their income to the strict requirements of a mainstream lender and can end up struggling to access a mortgage.

Luckily, there is another way. Specialist mortgage lenders are experts in dealing with self-employed borrowers.

They look at each case on its individual merits and have more flexible criteria around how they assess what you can afford, and how you can prove it.

Because these specialists are willing to lend to borrowers that can’t get a mainstream mortgage, they often charge a premium, so you could end up paying more.

What information will I need to provide for a self-employed mortgage?

A mortgage lender will want to see the same information as they do with any borrower – proof of ID, proof of address, and proof of your income and outgoings.

The major difference is that proof of income can be more complicated if you’re self-employed.

Instead of payslips, you usually have to provide at least your last two SA302 forms from HM Revenue and Customs, which show your tax calculation for the year. Lenders might also ask for your full audited accounts.

Morrey adds: ‘Lenders may also request three months’ business bank statements to see how the business is faring at the moment. For contractors they may ask for a minimum of 12 months’ worth of contracts in lieu of accounts.’

‘Lenders can request anything they deem necessary as part of their decision to lend, so be prepared to supply these documents to make the process as smooth as possible.”

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Do I need to have been self-employed for a certain amount of time to qualify for a mortgage?

Usually lenders will want to see at least two years’ accounts before lending to self-employed borrowers.

Although there are exceptions, says Jane King: ‘For some occupations (usually professions such as doctors and lawyers) a lender may accept one year,’ she explains. ‘However the vast majority require at least two.’

Some specialist lenders also accept just one year’s accounts, regardless of profession, although they may charge a premium.

Will most lenders offer mortgages to self-employed people?

Yes, if you work for yourself, you can usually access the full product range of most lenders.

For example, Aldermore is a specialist mortgage lender that supports the self-employed with flexible lending criteria and smaller building societies are often willing to look at each case individually to see if they can find a way to lend. There are also many lenders you may not have heard of that a mortgage broker has exclusive access to.

A broker can also help you navigate the market. They’re experts in helping self-employed borrowers find a mortgage and have access to specialist lenders that don’t deal directly with borrowers, helping widen your search.

By Christina Hoghton

Source: Ideal Home

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Accountant’s advice on getting a mortgage if you’re self-employed

The property market is booming, but not for the first time, flourishing for a select group of people. Unfortunately, for those that are counted as self-employed, it is harder than ever to achieve the dream of owning your own home.

More than four million people in the UK are classified as self-employed and recent industry research found 71 percent of participants in a survey of UK freelancers, said that they are worried about saving for later life or buying a home following the pandemic, with women most likely to be affected.

There has been rapid growth in people who are their own bosses seeking advice on how to secure that ever elusive mortgage and get the first step onto the property ladder. In response, accountancy and tax platform founder Darren Fell, of Crunch, has shared his top tips on how to get a mortgage while being self-employed.

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Top tips from an accountant

Speak to brokers: Not all brokers will offer you the same deal and have the same connections. Shop around and get as many quotes as you can. Some lenders may have more lenient or strict lending criteria and it is important not to commit yourself to a bad deal.

Check your credit rating: Ensure your credit file is in the best possible shape by getting on the electoral roll, staying away from short-term high-interest loans and if possible staying out of your overdraft.

Make sure your accounts are up to date: To earn the best rates you can, make sure all your accounts and tax filing history is up to date. Though a struggle for some self-employed businesspeople, it pays off when applying for a mortgage.

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Minimise credit checks for other insurance or credit applications: Multiple credit checks in a short space of time can reduce your overall credit score, according to some experts. Using comparison sites for insurance quotes could potentially affect your credit history as well as applying for new credit cards, as can often end up running various checks which might then affect your credit history.

Get yourself an agreement in principle: Some estate agents in charge of in-demand properties may not allow you to even view a property without a decision in principle. By getting this decision, which effectively gives you a definitive budget, you can house-hunt with confidence.

Knowing your budget and sticking to properties within it will make your mortgage application more likely to be accepted.

By Robbie Purves

Source: Daily Record

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IR35 reform ‘stifling’ access to talent

The recent reform of IR35 legislation is “stifling” access to specialised talent in the UK, according to research.

Some 50 per cent of companies said IR35 was the main obstacle to hiring contractors in the past 12 months.

This has led to 70 per cent of businesses and recruiters seeing a reduction in their limited company contractor workforce, according to a survey of 1,200 contractors, recruitment businesses and end clients in February this year by Kingsbridge Contractor Insurance.

The same percentage of contractors will now only look for roles that are outside IR35 rules over the next six to 12 months, despite these accounting for 41 per cent of roles on offer.

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Two thirds (66 per cent) of contractors said they would not even consider a role inside IR35 rules.

Paul Havenhand, chief executive of Kingsbridge Contractor Insurance, said the UK economy is “being hampered” by a severe recruitment crisis.

“Contractors, as a highly skilled, flexible resource, could be providing a much-needed interim solution to keep things working and avoid major disruption to UK businesses,” he said.

“But there has been a 11 per cent drop in working contractors in the last twelve months.

“The complexities of IR35 and perceived risks are putting businesses off.”

The research was conducted for Kingsbridge, as part of a whitepaper called ‘IR-35 – One Year On’.

The white paper said half of recruiters surveyed feel that end clients were not prepared for the reform in the private sector, which Kingsbridge said suggests that “further education” is required.

Furthermore, it said HMRC’s Employment Status for Tax tool (Cest) is ‘not fit for purpose’ and is ‘hampering business growth’ by blocking access to contract labour.

“Recruitment agencies who reported that their end clients use Cest have seen a larger reduction of limited company contractors engaging in providing services compared to independent employment status tool users,” it said.

This was based on 38 per cent of the recruiters surveyed who said their end clients who use Cest have seen a 61 per cent or greater reduction in their contractor pool, compared with 23 per cent who use independent employment status tools.

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One criticism of the tool was that it produces indeterminate results 21 per cent of the time.

An HMRC spokesperson said: “HMRC will stand by Cest’s results provided accurate and correct information is used, in accordance with our guidance. The tool was rigorously tested against case law and settled cases by officials and external experts.”

Legislative reform

IR35 is a tax law that was reformed in April last year to require the end client, and not the contractors they hire, to decide if the working relationship resembles a self-employed engagement or employment. As part of this reform, the fee-paying party (either the end client or recruitment agency) now shoulders the liability.

The aim of the reform was to stop the promotion and misselling of disguised remuneration schemes, however the legislation has received criticism.

In April last year, the All-Party Parliamentary Loan Charge Group said the government needs to accept the “obvious reality” that IR35 legislation is “fundamentally flawed”.

The group said while it understood and supported the aim of stopping employees from seeking tax advantages for falsely claiming to be self-employed, the IR35 rules had “ironically muddied the waters and unintentionally made it harder, not easier, to define contracting and freelancing”.

An HMRC spokesperson said: “The off-payroll working rules ensure that individuals working like employees, but through their own limited company, are taxed like employees.

“The changes that took effect last year ensure that rules which have been in place since 2000 are applied correctly. We consulted extensively on off-payroll working and are continuing to deliver an extensive education and support programme to help industry and contractors implement the reform.”

“How an organisation decides to engage its workers remains a business decision for organisations to make.”

By Sally Hickey

Source: FT Adviser

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IR35 ‘biggest threat’ to contracting sector

Contractors most concerned about impact of IR35 reform in 2022

Despite confidence in the economy returning since the easing of Covid restrictions, IR35 reform, which came into force in April last year, remains the stand-out concern for contractors.

A survey of more than 1,200 contractors by insurance firm Qdos found that three in five (61%) see IR35 as the “biggest threat” to working this way in 2022.

This is more than ten times the number of contractors who see Covid (6%) or Brexit (6%) as the biggest concern. The incoming increase to dividend tax was earmarked as the second biggest difficulty for this sector.

According to research by IPSE, the freelance sector contributes £303bn to the economy annually. However, changes to IR35 – which have seen the responsibility for determining tax status shift from the contractor to the business engaging them –were found to have a big impact on contractors’ income.

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Reform driving people out of contracting

IPSE’s survey, which echoes Qdos’ findings, revealed that seven in 10 (70.9%) independent workers believe IR35 to be the most “detrimental” factor on their financial wellbeing. 

Andy Chamberlain, head of policy at the self-employment trade body, said: “While newspapers and news programmes are filled with analysis on the pandemic, inflation and the planned rise in National Insurance, today’s research shows that there is one forgotten crisis that has been even more economically damaging to many of those who work for themselves: IR35. 

“The changes to IR35 last year have had a devastating impact, with thousands leaving contract work altogether.”

In fact, a study published by IPSE showed that the number of solo self-employed people in the UK fell by five per cent in 2021 – the figure now stands at 4.1 million compared to 4.3 million in 2020.

Chamberlain added: “While it is positive to see research today on IR35, there needs to be more attention from the press and by the government to solve the issues around the flawed reform. 

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IR35 creates ‘plethora of challenges’ for contractors

“Put simply, without media and industry pressure and a governmental review, the changes to IR35 will continue to burden the whole supply chain – making it increasingly difficult for freelancers to make a living and for UK companies to source the flexible expertise they need to get projects done.”

Seb Maley, CEO at Qdos, said that while some businesses are starting to take a more “fair and pragmatic” approach, IR35 reform has still created a “plethora of challenges” for contractors, which is “jeopardising this way of working.”

“The fact that contractors still see IR35 as the stand-out threat in 2022 – and by some distance – tells you everything you need to know about the journey ahead, along with the progress that needs to be made this year.

“[…] Far too many businesses are insisting that contractors work on the payroll, regardless of their true IR35 status. Not only will this see businesses struggle to attract the flexible talent they need to recover from the pandemic, but forcing genuinely self-employed people onto the payroll will also result in significant and needless cost rises.”

What does this mean for contractors?

Omicron uncertainty and the challenges brought on by IR35 have made life difficult for contractors already this year. And until the government step in or businesses get to grips with the reform, the issues around IR35 could continue for some time.

With this in mind, it’s vital that contractors carry out their own diligence regarding IR35 compliance. And given HMRC can launch investigations retrospectively – to when contractors held the liability – independent workers are advised to hold IR35 defence insurance, which helps mitigate the risks presented by this complex and controversial legislation.

Source: Contractor Weekly

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IR35 is the biggest threat to the contractor working model, survey finds

The majority of contractors see the UK’s IR35 changes to the way employment status is judged as the biggest threat to their business in 2022, according to recent research.

A survey of more than 1,200 contractors by IR35 insurance provider Qdos shows that 61 per cent see the rule changes as the “biggest threat” to the contracting business model, which is said to be worth more than £300bn annually to the economy, according to the IPSE, the contractors, consultants and interims association.

Qdos found this was more than 10 times the number of contractors most concerned about the impact of coronavirus (6 per cent) or Brexit (6 per cent). Incoming dividend tax increases (18 per cent) were earmarked as the second biggest threat, although only a third of folk surveyed were concerned about those changes.

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The introduction of IR35 reform to the private sector on 6 April 2021 saw the responsibility for assessing IR35 status shift from the contractor to the medium or large business engaging them. As part of this reform, which mirrors changes introduced in the public sector in 2017, the liability also shifted, from the contractor to the fee-paying party in the supply chain (either the recruitment agency or client).

Qdos CEO Seb Maley said: “IR35 reform has created a plethora of challenges for contractors, jeopardising this way of working for thousands. The fact that contractors still see IR35 as the stand-out threat in 2022 – and by some distance – tells you everything you need to know about the journey ahead, along with the progress that needs to be made this year.

“Not only will this see businesses struggle to attract the flexible talent they need to recover from the pandemic, but forcing genuinely self-employed people onto the payroll will also result in significant and needless cost rises.”

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

Qdos’s research found that 39 per cent were “confident” about their prospects for 2022. However, 37 per cent were either “concerned” or “very concerned.” There was an 83 per cent rise in contractors deemed outside IR35 by their clients from April to November 2021.

Even the government’s own departments are having trouble with IR35. In December it was revealed that guidance from Her Majesty’s Revenue & Customs’ employment checker tool had led to wrong calls on the tax status of freelance workers, costing £120m across two Whitehall departments.

Financial reports from the Ministry of Justice and the Department for Environment, Food and Rural Affairs show they face combined additional tax bills of at least £121m due to incorrectly determining the status of their contractors, despite following HMRC’s “accompanying guidance” and using HMRC’s Check Employment Status for Tax (CEST) tool.

IPSE research from October 2021 found 35 per cent of contractors in the UK had become permanent employees, retired, shifted to work overseas or are “simply not working” since IR35 tax legislation was revised in April 2021.

By Lindsay Clark

Source: The Register

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Does taking an inside IR35 contract affect future mortgage applications?

‘Does taking an inside IR35 contract affect future mortgage applications?’ is a relevant topical question, and I understand the catalyst for it. It comes at a time when Halifax has clarified its lending criteria for all types of employees, writes John Yerou, CEO of Freelancer Financials.

As there is no mention of IR35 in Halifax’s new lending criteria, it’s right to question the legislation’s bearing on future mortgage applications. But there’s a reason IR35 isn’t mentioned, and, when you think about it logically, you’ll get the gist, too.

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Using Halifax as the yardstick by which to measure other lenders

For the purposes of answering this question, I’m going to use the new Halifax terms as the fallback position. That’s because, time and again, Halifax has led the way in contractor mortgages.

Their new criteria show just how open they remain to independent freelance and contract professionals, despite all the new risk factors lenders are facing in the wake of the ongoing covid-19 pandemic. I also think that it won’t be long before more contractor-friendly mortgage lenders follow a similar path to the Halifax’s.

The caveat against which all this advice is given

Before I go on, let’s emphasise something key. There is no overarching law that tells banks and building societies how to deal with self-employed applicants. At any given time, any number of lenders might provide the best option for you, whether you’re inside IR35 or not.

So there is no ‘x + y = z formula’ we can apply across the board. Deals change daily. Some lenders are more amenable to time taken off between contracts, or will offer a higher ‘income multiplier’ than others.

Yet others may provide a specific product, maybe an offset mortgage, that might suit your situation best. You’re always, without exception, best off calling a contractor-specialist mortgage broker before approaching a lender direct yourself.

Treating contractors as employees

What’s clear from Halifax’s updated lending criteria is that once a contractor reaches a certain point in their contracting career, the lender will (in effect) treat them as an employee on PAYE.

The basic conditions a contractor must meet to secure this treatment, are that they must:

  • either earn £500 per day/£75k-per-annum or be an IT Contractor (any income);
  • have racked up >12 months continuous employment, plus have >six months remaining on their current contract, or
  • at time of application, have two years’ continuous service in the same line of work

Additionally, if the client or umbrella company for whom the contractor works pays their tax, Halifax will treat them as an employee.

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How does this help answer how IR35 affects mortgage applications?

Think about this dynamic from a role reversal aspect. When a mortgage adviser asks a PAYE employee what their income is, the employee doesn’t give them their amount after tax. They give them their gross annual salary. Similarly, the adviser doesn’t go through payslips looking for deductions; they just want proof that the employee is consistently earning and banking what they claim.

It’s the same for contractors. Lenders annualise their gross day rate to work out an equivalent ‘salary’ for their affordability calculations. Once they’ve established that top line annual figure, and proved it with bank statements, that’s it. They won’t go into deductions.

Even if a contractor is working inside IR35, the difference between what an IR35-caught individual and a PAYE employee on the same rate would ‘take home’ is negligible.

IR35, against updated criteria, becomes a moot point, which is why we:

  1. jumped on ‘that’ LinkedIn rumour in the first place, and
  2. didn’t mention IR35 in our previous article for ContractorUK setting out Halifax’s lending criteria, as all it does is muddy the waters!

If you come up against a mortgage adviser or broker who asks you about your IR35 status as part of your home loan application process as a contractor, you now have an argument to combat their objections! If they persist, then you’re probably talking to a mortgage lender that’s not perhaps as contractor-friendly as they claim. In short, do yourself a favour and talk to us instead!

The answer you’ve been searching for all this time…

If you’ve skipped to the bottom of this article in the hope of quickly finding out the answer to the question — ‘Does taking an inside IR35 contract affect future mortgage applications?’, here’s the answer you’re looking for:

Answer: No. IR35 only affects the way you’re taxed. For mortgage purposes, you will be assessed the same way as before, depending on whether you operate through a limited company or an umbrella company.

Written by John Yerou

Source: Contractor UK

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