BEFORE YOU APPLY
Before you apply for a mortgage in the UK, you should be aware of the following:
- Mortgage lenders are likely to consider your Gross Taxable Pay (not the agency pay) for the mortgage offer. If you have a high level of expenses/director loan, the amount you can borrow will be much lower. If in doubt, check with us first.
- Your Gross Taxable Pay is calculated after deduction for Employer National Insurance
- Your work has Employment Status in the UK, please advise your lender or broker that you are treated as a DEEMED EMPLOYEE and NOT SELF-EMPLOYED. This will reduce further confusion for you and your broker.
- You may be asked for your UK tax return statements. If you have not organised your self-assessment and UTR (Unique Tax Reference) number already, this may delay your application. Please contact us to organise as UTRs may take up to 6 weeks..
EXPLAINING YOUR CONTRACT AND PAYROLL TO A BROKER OR LENDER
Your contract may be difficult for lenders to understand so it is important to give them as much information as you can to enable them to understand how your income will fit with their lending criteria.
Please find below a general explanation we offer to lenders:
- Clients are engaged in a five year contract to provide contract pilot services on Ryanair aircraft. To engage in this contract, it is a requirement to be a director of an Irish Limited company. Clients normally have a 16-33% shareholding in the company.
- If living or working in the UK, client income is normally processed through the UK payroll.
- Contract work has employment status in the UK under IR35 rules and the client is treated as a deemed employee of the Irish Limited company. The Irish limited company is registered in the UK as an oversees employer.
- Agency Pay for flying hours received by the company each month is converted into net pay by the deemed employment method of calculation, as follows:
Agency Pay = Gross taxable pay + (Expenses plus Director Loan) + Employer National Insurance
Less deductions for
PAYE and NI (or EU social insurance, depending on country of liability)
Student Loan (if applicable)
- Clients are paid in Euro but receive GBP payslips , which detail the EURO take home pay equivalent. The exchange rate used for each month’s payroll is based on the HMRC exchange rate and is provided on all our UK payslips.
- We are able to supply company accounts, however they generally do not show profits due to Type rating being treated as a director loan, as follows:
DIRECTOR LOAN AND EXPENSES
A pilot is entitled to claim expenses once they are wholly and exclusively related to his/her work.
The expenses are treated in the company accounts as a director loan. The directors loan is reduced each time the pilot uses his expenses in their salary. Therefore, the directors loan accounts are not future expenses but expenses already paid out by the pilot.
Contractors incur a high level of expenses in their early contract stages as they are based temporarily for the first six to 12 months of contract and incur substantial work related training, travel, subsistence and accommodation costs. This temporary training period is a contractual requirement..
Contractor agency income generally ranges from €45,000 in the first year to €60,000 in the 2/3 year before taxes and expense allowances. All expenses for UK purposes have been discussed in detail with HMRC compliance unit.
In the UK payroll:
- Expenses are the actual, monthly arising expenses incurred plus a 5% general expenses allowance under deemed employment rules
- Director Loan: Repayment of early contract expenses brought forward and not already repaid.
We are aware that some lenders offer an exclusion order which would mean that the expenses would be looked at with greater flexibility.
We are happy to provide supporting evidence to assist with any application.