Buy to Let Self-Employed

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Buy to Let Mortgages for Self-Employed

Self-Employed people frequently seek our advice on whether they can get a Buy to Let mortgage. They often worry that it will be more difficult for them to become landlords – but that’s not the case. In fact it can be even easier than getting a standard residential mortgage.

What are the features of a Buy to Let Mortgage?

A Buy to Let mortgage works in much the same way as a residential mortgage – it’s a long-term loan to enable you to buy a property.

You can choose a fixed or variable rate loan, and you have the option of a repayment mortgage or interest-only. Generally, you will need a larger deposit for Buy to Let: 25% is the norm.

What should you consider if you are Self-Employed and looking for a Buy to Let Mortgage?

Lenders will usually welcome Self-Employed applications, as your employment status is not particularly relevant for Buy to Let. What’s important is how much rent your property will generate. Lenders tend to want the rent to cover the monthly mortgage cost by at least 125%. That way they know you can afford to repay the mortgage and keep up with any repairs or other rental costs.

Some lenders do set minimum income requirements, mainly to be sure you can pay the mortgage if you don’t have a tenant in place for a month or two.

Should I Buy to Let as an individual or through a Limited Company?

It’s fairly common for landlords to set up limited companies, especially if they have more than one Buy to Let property. The main advantage to this is to reduce tax bills, especially for higher rate taxpayers, who stand to lose 40% of rental profits in tax.

A limited company pays corporation tax at just 19%. But there are various pros and cons to setting up a company, so do seek expert advice if this is something that interests you.

What is a Special Purpose Vehicle (SPV)?

An SPV is a limited company set up purely for Buy to Let. When you buy a property through an SPV, you are treated as a company for tax purposes, rather than as an individual. Most Buy to Let providers only lend to SPVs rather than other types of company.

The only income an SPV can receive is tenants’ rent. When thinking about how best to run your rental property, it makes sense to decide at the start whether to set up an SPV or operate as an individual. Making the change at a later date can mean mortgage fees and potentially Capital Gains Tax.

Speak To An Expert

We offer complete flexibility around you and can meet either face-to-face or online via a video consultation. And with us all being qualified in our specialist areas and having access to a wide range of lenders, we are able to help you no matter which part of the mortgage journey you are at.

How do lenders assess income for a Self-Employed Buy to Let mortgage?

Where the lender sets a minimum income, they will ask for proof of your income. This usually involves sharing recent tax returns and company accounts. Two or more years’ accounting records will be helpful, but a year’s accounts are enough for some providers. Mortgage lenders will also check your credit score.

What is Top Slicing?

Top Slicing is something that certain lenders allow if your planned rental income falls a little short of the 125% required.

It allows you to use other income to reach the target – perhaps from your personal income or from the rent you receive from other properties. This is good news for your tenants as it can relieve the pressure to charge the maximum market rent – which also means it should be easier to attract people to rent your property.

What are the tax implications/benefits?

The first £1,000 of your rental income is your ‘property allowance’ and not taxable. If you make between £2,500 to £9,999 profit after expenses, or £10,000+ before allowable expenses, you need to register for self-assessment and submit a tax return each year.

Your expenses are the costs of letting the property, such as agent fees, repairs and insurance.

You will need to pay additional stamp duty on Buy to Let property, and when you sell, you might have to pay Capital Gains Tax. Running your Buy to Let as a business will have different tax implications, and you might have to pay National Insurance.

How can Assured help?

Our Mortgage Advisors will make it easy for you to explore your Buy to Let options. Applying for a Buy to Let mortgage is straightforward as long as you meet all the lender’s criteria, and we’re here to find you the most appropriate products.

It’s important to seek reputable advice on Buy to Let, as this type of mortgage is not authorised and regulated by the Financial Conduct Authority.

We have helped hundreds of Self-Employed people get a Buy to Let mortgage, so contact our registered office today for all the advice and support you need for a successful mortgage application. We are registered in England as providers of financial advice.

Your home may be repossessed if you do not keep up repayments on a mortgage or other debt secured on it.