Being Self-Employed and Employing Your Partner
Hi, guys and girls, Gary Das here and I want to talk to you today about being self-employed and employing your partner. A lot of my self-employed customers, whether they’re sole traders, contractors or limited company business owners, quite a few employ their partners. Now, it’s not an issue if you are employing your partner, but there are some minimum standards and minimum requirements the lender has within their criteria, particularly, if you’re paying them a large salary.
How to Get a SA302
What I would always recommend is if you’re going to be employing your partner within your business, I would look to have them working for you for, at least, three months before you start thinking about the mortgage side of things. What you’re going to need if they owned less than 15 to 20% of the business are three months’ payslips and three months bank statements. If you’re paying them a substantial amount of money, maybe they’re HR manager, and you’re paying them 100 grand a year, for example. Then I would increase that to six months because they are treated as an employee of the business. However, they’re employed by your business, so what the mortgage lender wants to make sure, is that you can sustain the level of income that you’re paying them for a period, whether it be three to six months.
A Key Tip
One thing I’m seeing a lot is after you’ve employed your partner, husband, wife, for a long period of time, you might want to make them a director. In making them director, you could potentially be giving them more than the 15 to 20% share in the company. Maybe you’re making them 49% shareholder. That is a significant structural change to a limited company business that majority of mortgage lenders are going to want that to be in place for, at least, 12 months. That’s not 12 months just in general, that’s a full 12-month trading year. That’s from the beginning of your accounting year to the end of your accounting year.
Plan and Prepare
There are mortgage lenders who could consider it if you have only been a shareholder for less than 12 months. However, you’re starting to limit the number of lenders available. You’re starting to make your circumstances more niche, which could see your interest rate increases. My ethos is all about planning, preparation, fixing the majority of mortgage lenders. If you’re planning to make that structural change to your business, and thinking about moving home, or investing in property, then speak to a mortgage adviser first. Thanks very much and I’ll see you again soon.
P.S. When you’re ready here is how you can get help from us:
1. Grab a free copy of our eBook 7 Mistakes Business owners and Entrepreneurs Make That Could Jeopardise Your Mortgage. Avoiding these mistakes will have a big impact on your change of mortgage success, getting your dream home or reduced monthly payment.
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