Pepper improves self-employed affordability calculations

Published on

Pepper Money has enhanced its self-employed criteria, including the introduction of the ability to use net profit retained within the business as part of the affordability calculation.

Under the new criteria, Pepper Money will be able to use the latest year’s net profit within an affordability calculation where a customer is a majority shareholder in the business.

The specialist lender will use the share of net profit in line with the customer’s share of the business. So, for example, a 60% shareholder would take 60% of the net profit figure. Where joint applicants have a combined shareholding of 100%, Pepper Money will take 100% of the net profit.

This improvement to Pepper Money’s self-employed criteria is designed to meet the needs of those customers who choose to retain profit within a business for use towards a future tax bill or capital investment but also want to use the full earnings to which they are entitled for affordability and LTI purposes.

Ryan Brailsford, business development director at Pepper Money, said: “In 2023, there were an estimated 5.6m UK private sector businesses, with 75% of these not employing anyone aside from the owners of the limited company.

There are often occasions where a limited company director may decide to retain some of the net profit within the business instead of paying it all as dividends. Profit may be kept in the business to facilitate further growth or for tax purposes, and in the right circumstances, net profit can be seen as income that is available for the customer to take in the form of dividends at any time.

According to data by Statistica, there has been a growing trend in self-employed profitability in recent years, and this increases the cohort of customers who may be looking to retain cash within their business instead of removing it all and paying as dividends.

By introducing this new criteria that considers retained net profit within an affordability calculation, we’re further demonstrating our commitment to serving the self-employed and making it easier for them to secure the mortgage they deserve.”

COMMENT ON MORTGAGE SOUP

We want to hear from you!
Leave a comment and get the conversation started.
You need to register to post, so please login or sign up below.

Latest articles

PropEco launches audit tool to tackle widespread EPC errors

PropEco has launched an EPC Audit tool designed to identify and correct errors in...

Antiquated homebuying system costs UK economy £1.5bn a year

The UK’s outdated homebuying process is draining at least £1.5 billion annually from consumers...

LSL’s Financial Services arm drives growth in first-half results

LSL Property Services has reported steady first-half results, with its Financial Services division continuing...

Market Financial Solutions launches ‘Fusion Premier’ range for portfolio landlords

Market Financial Solutions has launched a new ‘Fusion Premier’ range, designed to allow large...

Self-employed workers would switch to a salaried job to get a mortgage

The majority of self-employed workers would switch to a salaried job to get a...

Latest publication

Other news

PropEco launches audit tool to tackle widespread EPC errors

PropEco has launched an EPC Audit tool designed to identify and correct errors in...

Antiquated homebuying system costs UK economy £1.5bn a year

The UK’s outdated homebuying process is draining at least £1.5 billion annually from consumers...

LSL’s Financial Services arm drives growth in first-half results

LSL Property Services has reported steady first-half results, with its Financial Services division continuing...