Residential Mortgage for UK Expat Business Owner Earning Self Employed US Income

Our client owned a thriving UK business and had moved to the US three years ago to set up a similar company in the States and tap into the American market.

Having established their US company to the point of self-sufficiency, they were now returning to the UK and looking to purchase a family home in Surrey.

They were converting their US property into a buy to let purchasing the UK residential home as a second property.

The Scenario

Due to their complicated income structure and overseas earnings, they were experiencing a few difficulties with their mortgage application:

• Although they owned a UK and US company, they only took income from the American business in dividends and nothing from the UK business.
• Their income was classed solely as foreign, self-employed earnings, which can be difficult to get finance for.
• They also couldn’t leverage their UK company earnings as they weren’t taking a salary or dividends from the British business.
• But, they needed proof of a higher income to reach the loan value they wanted – an £889k loan on a £1.185m property, coming to roughly a 75% loan to value (LTV).
• They also had no UK tax filings for the last 2-to 3 years due to the way they were drawing income.

The Solution

We sourced a lender who could look at the potential of both of their businesses:

• We used the clients’ US self employed income (paid in dividends)
• And also leveraged their UK company’s net profits, even though they hadn’t withdrawn any income from the company in recent years.

Although this reduced the number of mortgage lenders willing to take on our clients’ case (increased their loan size potential and wanted to keep their interest rates at a minimum by putting down a higher deposit), we managed to find them a standard mortgage with excellent terms.

And we didn’t need to use a private bank and pay higher fees to keep the rates low on this complex case.

We secured:

A 5 year fixed-rate mortgage with a low-interest rate of 1.14% - is an excellent deal for a returning UK ex-pat with self-employed income in a foreign currency.

The US Self Employed Income Hurdle

Tax filing requirements are different in the US and UK, so you don’t have a standardised comparison for mortgage lenders to use in their calculations - and this can cause an issue.

If you’re working in the US, you’ll know the tax year is in line with the calendar year, while ours runs from April to April.

For a mortgage application, you’ll also need to supply different tax documents for each proof of income - US or UK.

Our clients in question had already changed the trading period for their UK company to align with the US tax year - you can do this via Companies House.

But, this meant that their first tax year from the change only ran for nine months (from April to December), and their next tax year hadn’t been completed yet, and wouldn’t until December 2021.

How did we get around this?

We liaised with our client's accountant and the mortgage lender to consolidate a year’s worth of financial reporting for the UK company based on previous accounts. It was accepted, and the loan was approved.