Here are the latest updates from Barclays. These products are available via our direct to lender mortgage club which offers you payment on completion and a lot more besides!
Changes to allowable income when lending to Limited Company Directors
Policy Amendment- Limited Company Profit After Tax (PAT)
In order to simplify our policy, reduce required packaging documentation and speed time to offer for Limited Company Director applications below £1m lending, we no longer accept ‘Profit After Tax’ (PAT) when assessing income and affordability.
Applications below £1m lending
Allowable Limited Company Director income
Where dividend income can be proven as sustainable, based on the profit levels evidenced, we will use either the average of the last 2 years’ salary and dividends, or the latest year – whichever is lower.
Where dividend income exceeds PAT, and is therefore considered unsustainable, we will cap the dividend used in the assessment in line with the PAT
Packaging requirements* (below £1m lending)
- Latest 2 years’ HMRC Tax Assessments (SA302)
OR
- Latest 2 Years’ Tax Calculations
- Latest 2 years’ HMRC Tax Year Overviews showing the full tax liability has been paid
Most recent year’s Trading Accounts, dated within 18 months of the application submission date and produced by a qualified Accountant
Applications for £1m lending and above (excluding any added fees)
Allowable Limited Company Director income
If your Limited Company Director client/s individually or collectively hold a minimum 51% shareholding in the company and require lending of £1m or above, if the standard assessment of salary and dividends (as detailed for cases below £1m) is insufficient to evidence the income and affordability required, alternatively you can use salary and PAT instead.
If PAT is being used in addition to salary, this needs to be pro-rated where your client/s don’t have a 100% shareholding. A 50% haircut will also be applied in all instances with the usable PAT figure based on the latest three years trading. We will use either the average of 50% of the last 3 years’ PAT, or 50% of the latest year – whichever is lower.
Please note that if the calculated PAT exceeds 5x the average [Salary + Dividends] paid to your client/s over the 2 most recent years, we will cap the PAT used in the assessment in line with this 5x figure.
Packaging requirements (£1m lending and above)
Where standard Salary and Dividend income is sufficient to support your clients’ lending, please follow the packaging requirements for cases below £1m. Only in the event that PAT is being used, should you provide the requirements detailed below, instead.
- Latest 2 Years’ Tax Calculations
- Latest 2 years’ HMRC Tax Year Overviews showing the full tax liability has been paid
- Latest 2 years’ Trading Accounts, with the most recent dated within 18 months of the application submission date and produced by a qualified Accountant
- Accountants reference – to support the application, we will require additional information from the company accountant.
This should be provided on our standard form which will be available in due course from the useful document section of our intermediary website
IMPORTANT: Cases submitted from Thursday 9th February, will be required to meet the amended policy, as outlined in this communication.