How IR35 Affects Contractor Mortgage Applications
How IR35 Affects Contractor Mortgage Applications
Blog Article
If you're a contractor, you've likely heard of IR35—but how does it impact your chances of getting a mortgage? With changing tax rules and increased scrutiny from HMRC, it’s important to understand how IR35 status can influence how lenders assess your income.
What is IR35?
IR35 is a set of tax rules designed to determine whether a contractor is genuinely self-employed or effectively working as an employee for tax purposes. If you’re “inside IR35,” HMRC views you as an employee, meaning you’ll pay more in tax and National Insurance.
If you’re “outside IR35,” you’re considered genuinely self-employed, usually working through your own limited company.
How IR35 Impacts Mortgage Applications
Mortgage lenders want to understand your true financial position. If you're inside IR35:
You may be paid through an umbrella company
You might not receive dividends or business profits
Lenders may view your income as more like a PAYE employee
If you're outside IR35:
You’re more likely to be paid via your limited company
Your income could include salary + dividends
Specialist lenders may use your contract rate to assess affordability
Key Considerations
Inside IR35? Use a Specialist Broker Some lenders don't understand umbrella company pay structures or how IR35 affects income. A contractor mortgage specialist will know how to present your finances properly.
Income Presentation Matters Whether inside or outside IR35, the way your income is packaged (e.g., contract rate, payslips, or tax returns) has a major impact on how much you can borrow.
Provide Clear Documentation You may need to show:
Recent contracts
Payslips (if under umbrella)
Tax returns and SA302s (if outside IR35)
Final Thoughts
IR35 can be confusing, but it doesn’t have to block your mortgage plans. The key is working with the right broker who understands IR35 and how it affects contractors.
At Contractor Mortgage Solutions, we’ll help you navigate the IR35 maze and secure a mortgage that reflects your true earning power.