Limited Company vs Sole Trader

[Conorjm10]

14 minutes ago, monkeybusiness said:

I had a real fall out with my bank (HSBC) when moving house a few years ago. I'd previously gone limited for various reasons, and have always paid myself as little as possible to limit my tax burden. During a meeting with the bank about a possible business loan to buy some machinery (which they granted but I didn't end up bothering with) the bank manager commented that my income would make getting a mortgage difficult (not an issue at the time as I was already sorted in the house I lived in). As I have my personal account as well as current and previous business accounts all with HSBC the manager could see that things were healthy/affordable and suggested I came to see him if ever wanting to get a new mortgage.

Fast forward a couple of years and we decided to move house, and I needed a mortgage for £250k against it. Computer said no on the figures I was paying myself so I went to arrange a meeting with the bank manager - it turned out that particular chap had moved on and I saw someone else. She pretty much laughed in my face when I ran through the figures with her... I asked her how much I needed to pay myself in order to borrow the money - 'It doesn't work like that' was the response.

'OK - forget about my current set up/employment/business. If I get a job tomorrow earning £80k a year, how long do I need to be employed before I am mortgageable for the amount required?' said I.

'3 months' she replied.

'OK - I'll see you in 3 months with my pay slips then'.

'No - it doesn't work like that!!!!'....

'Rrrraaaarrrrrrgggggfghhhhhhhhhhhhh!!!'

In the end Virgin money sorted it through my broker, happy to lend against the company accounts etc (and I didn't have to pay myself any more). But ideally you want to show continuous growth or you can severely limit the lenders willing to look at you. 

Thats very interesting and applicable to my situation as me and my partner are looking to buy our first home soon. Definitely worth keeping in mind! Thanks for the info.

[monkeybusiness]

8 minutes ago, Conorjm10 said:

Thats very interesting and applicable to my situation as me and my partner are looking to buy our first home soon. Definitely worth keeping in mind! Thanks for the info.

All you need to know is that banks are bastardos, and don’t like to help you!

[Big J]

7 minutes ago, monkeybusiness said:

All you need to know is that banks are bastardos, and don’t like to help you!

I think it's often the bank that you're with (and have been for years) that treat you the worst. 

 

Both my wife and I have been banking personally with Natwest for 20 odd years. We spent over a month faffing around trying to open a new business account and each time they wanted more and more info (down to what the average price of a tonne of wood was, how many loads were going out each week etc) and after they said they needed another phone conversation that wouldn't happen for another week, we gave up. 

 

Then spoke to HSBC and it took 1 week from initial contact to business account approved, including a £5k overdraft facility.

[Steve Bullman]

3 minutes ago, Big J said:

I think it's often the bank that you're with (and have been for years) that treat you the worst. 

 

Both my wife and I have been banking personally with Natwest for 20 odd years. We spent over a month faffing around trying to open a new business account and each time they wanted more and more info (down to what the average price of a tonne of wood was, how many loads were going out each week etc) and after they said they needed another phone conversation that wouldn't happen for another week, we gave up. 

 

Then spoke to HSBC and it took 1 week from initial contact to business account approved, including a £5k overdraft facility.

My own bank wouldn't even give me a mortgage!

 

Ironically my mortgage is with Natwest currently

[Paul in the woods]

40 minutes ago, monkeybusiness said:

All you need to know is that banks are bastardos, and don’t like to help you!

Not really. In the good old pre-financial crisis days you could self certify your income for a mortgage. Too many people without a reliable income did this and helped caused the crash so banks stopped it preventing sensible people from getting on with their lives.

[monkeybusiness]

20 minutes ago, Big J said:

I think it's often the bank that you're with (and have been for years) that treat you the worst. 

 

Both my wife and I have been banking personally with Natwest for 20 odd years. We spent over a month faffing around trying to open a new business account and each time they wanted more and more info (down to what the average price of a tonne of wood was, how many loads were going out each week etc) and after they said they needed another phone conversation that wouldn't happen for another week, we gave up. 

 

Then spoke to HSBC and it took 1 week from initial contact to business account approved, including a £5k overdraft facility.

I keep swearing that I am going to leave HSBC - I've banked with them for over 30 years and they are worse than useless! It is just a pain to shift everything across (my main concern is asking customers to change payment details - everything is paid by BACS now and they know that is a massive hold over existing customers!).

Total thread derail but many moons ago my wife and I eloped to New Zealand to get married (just the 2 of us, it was ace!). We were delayed in Heathrow on the way out and I took the opportunity to call HSBC and explain that I was going to be abroad for the next 6 weeks and would be spending pretty heavily - please be assured that it was all above board etc etc (over the years I've done quite a bit of travelling and always use my current account debit card - not once have I forewarned the bank or had an issue with cards being stopped etc).

Everything was going swimmingly in NZ - we had arranged a wedding photographer and were to pay her in cash on our wedding day so we needed to draw a bit out and keep hold of it for said purpose. A couple of days before the wedding I couldn't get money out of a hole in the wall but I didn't think too much of it - we were in a little village and I assumed the cash point had run out of money (there was definitely money in the account).

Next day different town same issue - balls!

No problem thought I - there are HSBC banks in NZ. I popped into a massive branch in Auckland they day before we got hitched to be told they couldn't do anything...

'You are a global bank - your logo is on my card, I bank with you!' was all meaningless to them - naively I had bought in to all their marketing crap but it turns out there is no interconnectivity as far as customers are concerned...

Long and short of it was HSBC UK had stopped my card but made no effort to contact me (there was no shortage of funds in the account) - due to time differences and call centre opening hours I ended up having a phone call in the middle of the night before my wedding trying to get things sorted, and had to wait at a cash point on the morning of my wedding for it to pass midnight in the UK to allow me to draw out a second maximum withdrawal to pay the photographer...

And they've now closed all of the branches anywhere near here. 

They charge me every month for banking with them, and my accounts are always in credit.

They have made it extremely difficult to draw out my own cash to make machinery/vehicle purchases when necessary, and charge for the 'service'!

I detest them - a truly horrible bloodsucking scourge of a company!

 

[openspaceman]

37 minutes ago, monkeybusiness said:

I keep swearing that I am going to leave HSBC - I've banked with them for over 30 years and they are worse than useless!

Similar to me and I just have, subject to the new bank where I have a personal account allowing me to open a business account and transfer all the money and direct debits.

 

If all goes according to plan I will have free business banking for 30 months which should see out any business transactions from my much reduced working.

 

I was just going to blag it with my personal account except I was surprised to find it is not possible to transfer from a business account so I must gradually transfer any direct debits (credit card transfers, subscriptions etc.) to my personal account over the next couple of years and then close the new business account before fees crack in.

[Chris at eden]

20 hours ago, Matthew Storrs said:

Could this not happen any way? What if you maim someone in a car accident an insurance doesn’t pay out? 

No, a Ltd company is a separate legal entity so it gets sued, not you.  in your example you would be driving the car, not the company.   

[Chris at eden]

19 hours ago, Big J said:

My mistake. 

 

We're in the process of switching over from sole trader to Ltd, and it's hard to keep track of everything and keep doing the day job too. 

Either way, the accountant ran the figures and being an Ltd saves us some considerable amount of tax. We're stuck in that uncomfortable situation of not wanting to pay excessive tax (as noone does) but needing to declare maximal income in order to obtain a reasonable mortgage. 1st world problems, I guess....

The mortgage company will look at your salary plus the company profits to determine your max income. 

[Chris at eden]

19 hours ago, Steve Bullman said:

Sounds like the people you spoke to had crap accountants. I wouldn't let them put you off. Find yourself a decent accountant and get it done. You will save money. I felt physically sick for months when i went limited at the thought of how much tax I had been paying unecessarily previously. Can't do nothing about it though and I will never ever get that money back.

I did the same, put it off too long and ended up paying too much.  I save a lot on tax by being Ltd.