#21 - I'm self-employed - is it harder to get a mortgage‪?‬ ReadytoBuyPodcast

“I’m self-employed, is it harder for me to get a mortgage” is a question that I'm often asked, and being self-employed myself too, I can see it from both sides. 
In this episode, I’ll be discussing how it does tend to be more involved and there are more things to consider when you're self-employed, but it certainly isn't impossible, and with a bit of help you can navigate the requirements and get the mortgage that you need
02:06-03:26
It's important to make a distinction between the different types of self-employment - the two that we're going to discuss today will be:
Sole traders / partnerships
Limited Company Directors 
There are other forms of self-employment that we’ll cover in another episode:
Limited liability partner or an LLP, a common set up if you're a partner in a law firm, for example. Contractor - such as an IT contractor where you invoice a company each week or each month and you organize your own tax. 
What income can be used for the mortgage? 
It depends upon the business set up (i.e. sole trader/partnership or Limited Company) and we’ll explain both in detail. 
One thing to be aware of - lenders will use figures that are disclosed to HMRC, so for those of you that don't disclose everything to the taxman, you can't have it both ways, income that is declared to the taxman essentially will be the income that will be usable from a mortgage perspective. 
03:27-09:01
Sole trader / Partnership. You'll either be doing your own self assessments each year, or you'll have an accountant that does it.
Your financial year will be in line with the tax year(the fiscal year) which runs from the 6th of April through to the 5th of April. 
Self employment is quite different from being an employee where you have a set basic salary each month (and therefore easier for lenders to understand what you get paid now and going forward).
Being self employed, your income can be very up and down, and so lenders are making a judgement on your future income by looking at your track record - usually your last two years, possibly the last three.
As a sole trader, lenders look at your last two (possibly three) years’ Net profit figures. 
Not your turnover or total income, your net profit which comes after taking into account all of the expenses
Ordinarily, lenders will look at an average of your last two years figures, although if your latest year is lower, they'll tend to use that lower figure instead of an average.
They may also ask more questions, if it's quite a significant drop, to understand why that's the case, and more often than not, it might be a one-off capital expense (e.g. vehicle or equipment) which may give the lenders comfort that your profit next year will again be higher
 HMRC Documents
It depends on when we are in the year when applying for a mortgage, which determines which tax returns are required
For example - If we're in July 2022, most lenders would be fine accepting your tax return which ran to 5th April 2021 as your latest year. They appreciate you may not have completed your April 2022 return yet!
However, once we get to October 2022 – your tax returns for the period ending 5th April 2021 are now 18 months old and most lenders will want your 5th April 2022 tax return as the latest year. 
Worth bearing in mind and getting organized if mortgage time coming around.
Whilst your 5th April 2022 tax return isn’t required by HMRC until the end of January 2023, in our example, if lenders want it – this could be the difference between getting your mortgage and not!
Lenders didn’t historically ask for business bank statements every time, but since the beginning of the...