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Will it be harder for UK contractors to get a mortgage with April’s changes to IR35?

IR35 reform is finally being implemented on 6 April 2021.

The legislation is targeted toward the private sector, to align it with changes to IR35 made to the public sector in 2017.

The introduction of the reforms means the onus of declaring whether a worker falls under IR35 or not moves from the contractor to the client.

That change has hit a lot of contractors hard, with many feeling the new reforms take their financial destiny out of their grasp and into the hands of their clients.

While IR35 is specifically designed to draw a line under the amount and types of tax a contractor should be paying, the reforms have also had a knock-on effect on other financial aspects of their lives – especially mortgages.

It can already be a mammoth task trying to secure a mortgage. IR35 could throw another spanner into the works. What does IR35 mean for you as a contractor trying to secure a mortgage?

The new relationship between IR35 and mortgages

At the most basic level, an individual’s financial affairs – including tax – are deeply scrutinised whenever they apply for loans and mortgages.

If a contractor were to apply for a mortgage believing they were outside of IR35, for instance, and their client submits that they fall under IR35, then the contractor will likely be told by HMRC they have to pay more in tax and National Insurance contributions.

This change will, naturally, disrupt the application process and your personal financial forecasts, which some lenders may not look too kindly on – especially if you have to pay some back taxes due to what may be perceived as a ‘wrong’ IR35 declaration.

Different lenders have different approaches and solutions on handling IR35 reform, too, so it’s worth finding out your potential lender’s stance and how they deal with contractors both inside and outside of IR35 post-April 2021 if you wish to apply for a mortgage.

For a lot of contractors, the introduction of IR35 reform mostly raises questions of affordability when it comes to lenders and mortgages.

Applying for a mortgage as a UK contractor post-IR35 reform

The good news is, though, that while applying for a mortgage as a contractor may be a little more complex depending on your circumstances after 6 April 2021, lenders are still taking on applications.

IR35 reform doesn’t mean contractors will ever be blocked from applying for a mortgage.

Ultimately, there may be a bit more paperwork to fill out and new questions to answer when you apply for a mortgage.

We’re here to help you answer those questions and navigate IR35 when you’re applying for a mortgage. It’s the Greatpay way!

Our expert team has worked closely with contractors from all backgrounds across the UK for years, and our advice has helped a lot of them secure the best mortgage possible for the way they work.

For instance, did you know that partnering with the right umbrella company can go a long way to helping contractors make sense of IR35 reform and help them with their mortgage application?

Greatpay is here to point you in the right direction and help contractors across the UK better understand IR35 and the mortgage process. Contact our experts today to find out more!

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