The Intermediary – May 2025 - Flipbook - Page 66
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C AS E ON E
Self-employed applicant
with fluctuating income
self-employed person earning between
£40,000 and £70,000 over the past three
years is looking to purchase a £320,000
home with a 15% deposit. Their income dropped
slightly during the first year of Covid-19, but has
since recovered. Despite solid recent trading, the
inconsistent income has raised concerns with
some lenders, namely those that averaged income
over the full period. The client also has several
business expenses that have reduced their net
profit on paper, which has affected affordability
calculations, even though they retained surplus
funds in the business account.
A
UNITED TRUST BANK
UTB requires evidence of the last two years’ profit
history by way of an accountant’s certificate or
full accounts for limited company directors, or
the supply of the last two years’ SA302s and tax
overviews for sole traders. Salary drawn and net
profits will be considered to support affordability
for limited company directors or the net profit
stated on the SA302 for a sole trader.
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The Intermediary | May 2025
UTB always looks to use the latest year’s income
to support an application. If the applicant’s
business has recovered from reduced performance
during Covid-19, a suitable explanation provided
with the application will be sense-checked by our
underwriting team. If in any doubt, UTB is happy to
review the income evidence prior to any submitted
application and provide guidance on useable
income for the application.
HARPENDEN BS
We always work from the latest year’s figures and
are able to discount the Covid-19 period. If the
latest years income figures are showing a reduced
net profit or even a loss due to expenses that are
a one-off, we can work around these and use the
previous year’s income figures – providing they are
within 18 months old – and/or the retained profit
within the company.
TOGETHER
Together would be able to use the most recent
year’s net income. Additionally, we could use
an accountant’s projection letter to assess the
expected income for the coming tax.
We could explore using the higher figure on
the projection form if needed if the applicant was
failing affordability on their latest year’s income,
with confirmation from a qualified accountant
holding a professional certificate.
As long as they are six months into their new
tax year, we can use this projection. Although we
