Reply to: Withdrawing for deposit

[PerfectStorm]

Indeed but you'd wonder about the quality of their vetting if they didn't spot 20k or more appearing and not asking about it.

They ask where your money comes from, you say your company.

Guess Halifax is another organisation that's not wrapped up in contractor theory

[northernladuk]

Unless it indicates it in the payment reference they wouldn't know that a payment from the business account to your personal account is a loan or a dividend payment. But if they ask, you should of course be truthful.

Indeed but you'd wonder about the quality of their vetting if they didn't spot 20k or more appearing and not asking about it.

[TheCyclingProgrammer]

Don't the request the last 3 months bank statements so would show up on there?

Unless it indicates it in the payment reference they wouldn't know that a payment from the business account to your personal account is a loan or a dividend payment. But if they ask, you should of course be truthful.

[northernladuk]

No worries with Halifax taking my directors loan as I recall. It all looked the same to them anyway. Thinking back, I wonder if I specifically called 10k of it a directors loan or not in their forms. They wouldn't have known either way.

Don't the request the last 3 months bank statements so would show up on there?

[xenomorph]

Lenders will want to exactly where the money came from.
They won't accept BBL
They generally won't loans (bank, directors, credit cards, bloke in the pub)
Simplest way is to take the div and take the tax hit.
Talk in detail with the accountant AND the mortgage broker

Yeah the BBL was only suggested to clear debt and not use for deposit.

[PerfectStorm]

No worries with Halifax taking my directors loan as I recall. It all looked the same to them anyway. Thinking back, I wonder if I specifically called 10k of it a directors loan or not in their forms. They wouldn't have known either way.

[courtg9000]

Lenders will want to exactly where the money came from.
They won't accept BBL
They generally won't loans (bank, directors, credit cards, bloke in the pub)
Simplest way is to take the div and take the tax hit.
Talk in detail with the accountant AND the mortgage broker

[GhostofTarbera]

Can you even use BBL to loan yourself for personal use? I thought it was only for business use.
It states "has been adversely impacted by the coronavirus" is one of the criteria for being eligible. So if I lost my client due to COVID then I would be able maybe but even is a stretch haha

Who exactly is going to check what you used the BBL for? Especially if paid back before the 1st payment is due


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[xenomorph]

50+ people that live in London in my company alone are planning to depart London ASAP now they can work from home for life but hey ho, I think London house prices will tank in the new norm and never recover

Anyhoo

Get a 40K bounce back loan

Loan it to yourself

Pay all your credit cards off (this will save you £3K alone in next year)

Use £30K for deposit

Save like mad for 9 months and repay your loan to your company - no tax no due

Then either repay your BBL or keep it for a rainy day and pay it off over 6 years (the money you saved on interest charges from your credit cards will still put you in credit)

Job done




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Can you even use BBL to loan yourself for personal use? I thought it was only for business use.
It states "has been adversely impacted by the coronavirus" is one of the criteria for being eligible. So if I lost my client due to COVID then I would be able maybe but even is a stretch haha

[GhostofTarbera]

50+ people that live in London in my company alone are planning to depart London ASAP now they can work from home for life but hey ho, I think London house prices will tank in the new norm and never recover

Anyhoo

Get a 40K bounce back loan

Loan it to yourself

Pay all your credit cards off (this will save you £3K alone in next year)

Use £30K for deposit

Save like mad for 9 months and repay your loan to your company - no tax no due

Then either repay your BBL or keep it for a rainy day and pay it off over 6 years (the money you saved on interest charges from your credit cards will still put you in credit)

Job done




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[xenomorph]

So when I said taking loan out I did not mean that I wont have the money left in the company to cover it post CT and VAT.
That is all under control and I expect to have 6 month warchest left in company minimum after the deposit money comes out.

Reason I mentioned a loan was to see how it made a difference to paying it back vs paying the tax on the dividends.
Realistically i wont be able to clear all of my credit cards before I buy a house. I owe less then 5 figure sum but current expenses for rent and bills and personal reasons had to help out family financially while I was perm means I cant afford to buy property and clear all debit same time. If I do clear the debt first then I might miss out on getting a good deal on property while the market is down. So would end up costing me more plus as soon as 2022 hits prices where I want to buy are meant to increase as new tube station opens. Which will make it not affordable. So in a sticky situation. Yes I can choose cheaper area etc but Im thinking of this as a future investment as I dont plan on living in London all my life but London house prices always seem to shoot up. Once all this covid issue is gone in 2 years time I think London property market will recover in 2022.

[TheCyclingProgrammer]

Accountant just said only way is taking it as dividend and accepting that you will go into the second tax bracket.

Assuming you're already maximising the amount of dividends you can take at the basic rate in the most tax efficient way possible, then your accountant is right. Pay yourself an extra dividend (try and leave yourself a reasonable warchest though), pay the higher rate tax and enjoy your new home when you buy it.

About the only thing I can think of is if you normally have plenty of disposable income from your normal dividend payments at the basic rate - say £5-10k - that you could comfortably put away as savings, then you *could* (with all the usual caveats and warnings) take that amount as a director's loan now and repay it at the beginning of the next tax year from your usual basic rate dividends (so you're effectively borrowing from what you would have normally paid yourself in the next tax year).

[northernladuk]

Pretty standard, I think. I mean, borrowing for a deposit? That is going to impact affordability, obviously. Effectively, (up to) 100% of the house is financed by a loan of one kind or another.

Yep. Last two mortgages I've done ask where the money comes from and I was told loans won't do.

[PerfectStorm]

When I did it I did a directors loan of 10k and dividend the rest. There's no hiding that amount of money, you have to take the tax on the chin but the 10k loan will allow 10k of it to effectively come out of your FY2021 money. When FY2021 comes round, just declare a dividend of 10k and don't take any actual money out, then you'll be square. Tell the accountant you're doing this so they're not confused.

Then try and lessen all spending between now and April - as you'll get mega-taxed on the money you need to take out to cover it. 0% credit cards can help you defer into the new financial year.

Then what you have to look forward to is paying the tax on all this dividend not only this year but next year and in advance when they assume you'll have the same income again. So really it takes a few years to stop feeling the effects! The 10k directors loan will start you an extra 10k into your allowances, then you'll be taking out dividends to cover the dividend tax... don't be expecting a £1k tax bill for 2-3 years while it all settles down!

[jamesbrown]

Do you have a reference for that conclusion? Seems odd.

Pretty standard, I think. I mean, borrowing for a deposit? That is going to impact affordability, obviously. Effectively, (up to) 100% of the house is financed by a loan of one kind or another.