Conflict of getting a mortgage and paying no tax


Louise Misiewicz

Tax Consultant

8th January 2014

28th December by Simon Misiewicz

Are you looking to pay as little tax as possible?

Are you looking to get a mortgage in the future?

I know that there is a desire to pay very little money over to HMRC. Indeed why pay more tax than you should? One of my jobs is to ensure that you pay as little tax as humanly possible.

There is a downside to this pleasure of paying little tax.

If you are lending money to a joint venture partner, would you want to ensure that they had sufficient money to pay you back? The same applies for mortgage lenders and banks.

Imagine with me that a friend of yours is buying a property and they need £30,000. They have said to you that they will pay you 1% per month for a whole year. Immediately you are already counting the money in your head. “What a great way to make money” you may think to yourself.

One year later it is time for your friend to pay you back but they do not contact you and they certainly have not deposited any money into your bank account. You decide to call them but no one answers; the same applies to your email chasing them for payment.

How do you feel now? What do you think about the £30,000 that you loaned out?

The worst case scenario builds up in your head. No money and your friendship is in tatters.

The same applies to banks and if you did your due diligence like mortgage lenders and banks then this may not have happened in the first place. Your £30,000 would be safe and your friendship continues.

This is why mortgage lenders seek evidence to ensure that the money you are borrowing will be paid back. They will ask for your employment income, property income, business income. You name it they will ask for evidence to demonstrate that you earn money, pay your expenses and still able to repay the loan / mortgage.

If you are seeking a mortgage then it is important to demonstrate that you have the financial capacity to repay your loans. This is why I have a business to demonstrate that I am not relying on the income from my properties to pay back my loans / mortgages. As such I have a strong credit rating and a financial background. The banks will therefore loan to me.

Albeit I pay very little, if any, tax on my property portfolio I ensure that my business does. This demonstrates to HMRC that I am a law-abiding citizen paying my dues and it tells mortgage lenders that their money is safe with me.

In a nutshell tax should not be your mail driver. You need to consider what your strategy is and if you need a mortgage or a loan think about what financial checks they will perform and how you can demonstrate that their money is safe with you. This may mean that you need to pay tax in order to develop your property portfolio.

This clearly does not apply if you do not need money from the banks. In this case you should pay as little tax as possible by giving us a call.

If you are looking for an accountant or thinking of changing your current accountant because they do not understand property investing then please contact Selina on to book in your free “Property Finance & Tax Mastery” free one to one consultancy slot.

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