Paying yourself a salary when self-employed!

[s898]

Are banks more willing to give loans (specifically home loans) self-employed people these days? I know from various sources that it used to be very difficult as banks like to see a payslip especially for home loans. I'm recently self-employed and is in the process of setting up company etc..

In one of the threads here in MyBB somebody posted that they started a trust which in turn started a CC. The CC then paid a salary to the owner of the business. I was wondering how viable is this these days?

 

[TheMightyQuin]

Are banks more willing to give loans (specifically home loans) self-employed people these days? I know from various sources that it used to be very difficult as banks like to see a payslip especially for home loans. I'm recently self-employed and is in the process of setting up company etc..

In one of the threads here in MyBB somebody posted that they started a trust which in turn started a CC. The CC then paid a salary to the owner of the business. I was wondering how viable is this these days?

Trusts are expensive and good for putting assets into like houses, cars etc.

You cannot form a CC anymore...for a while now. It'll have to be a (Pty) Ltd or Sole Prop. depending on the turnover annually.

I own my own company but after hearing the huge amounts of paperwork involved for a business owner to apply for a home loan, I just applied as an employee of the company with 3 month's payslips.

Create your own payslips and just make sure they coincide with what's going on in your bank account.

Best in this case to have a business account and a personal account separately from each other, so you can show the salary being paid into your personal account.

This is what I did...I'm sure many people will also post here with their own ideas and versions...

 

[The_Ogre]

Trusts are expensive and good for putting assets into like houses, cars etc.

You cannot form a CC anymore...for a while now. It'll have to be a (Pty) Ltd or Sole Prop. depending on the turnover annually.

I own my own company but after hearing the huge amounts of paperwork involved for a business owner to apply for a home loan, I just applied as an employee of the company with 3 month's payslips.

Create your own payslips and just make sure they coincide with what's going on in your bank account.

Best in this case to have a business account and a personal account separately from each other, so you can show the salary being paid into your personal account.

This is what I did...I'm sure many people will also post here with their own ideas and versions...

You're wiser than my neighbour. He also runs his own business and for some reason thought it was a good idea to buy his house through the business.

During level 4 and 5, things were getting real close to the paw-paw hitting the fan because he wasn't allowed to work.

 

[s898]

Trusts are expensive and good for putting assets into like houses, cars etc.

You cannot form a CC anymore...for a while now. It'll have to be a (Pty) Ltd or Sole Prop. depending on the turnover annually.

I own my own company but after hearing the huge amounts of paperwork involved for a business owner to apply for a home loan, I just applied as an employee of the company with 3 month's payslips.

Create your own payslips and just make sure they coincide with what's going on in your bank account.

Best in this case to have a business account and a personal account separately from each other, so you can show the salary being paid into your personal account.

This is what I did...I'm sure many people will also post here with their own ideas and versions...

Isn't the bank considering it as self-employed even though you are getting a salary since you own more than 10% of the company? I read elsewhere that banks now have a box which asks for the percentage of the shares you have in the company. May be you took the loan before they had this change?

 

[d0b33]

Maybe get an accountant to draw up a "Statement of Accounts" and apply? Banks usually have a list of requirements for self employed people.

Here's a helpful guide

 

[rodga]

I applied in 2017. Im a director and also draw a salary. My accountant basically did cost to company as my proof of income. Besides all the other stuff I had to provide min 3 years business financial statements as well iirc.

 

[s898]

I applied in 2017. Im a director and also draw a salary. My accountant basically did cost to company as my proof of income. Besides all the other stuff I had to provide min 3 years business financial statements as well iirc.

Thanks. Meaning even if I give them a payslip they might still ask for 3 years financial statements.

 

[rodga]

Thanks. Meaning even if I give them a payslip they might still ask for 3 years financial statements.

You could try that route and it will probably work. I went the cost to company route as some of my expenses were covered by my company. Also I specifically applied via business banking. If you doing the payslips route then just apply as a salaried person and not as self employed?

 

[mister]

I know from various sources that it used to be very difficult as banks like to see a payslip especially for home loans.

Since when? If you are a sole proprietor they will ask for bank statements instead of a payslip.

 

[s898]

You could try that route and it will probably work. I went the cost to company route as some of my expenses were covered by my company. Also I specifically applied via business banking. If you doing the payslips route then just apply as a salaried person and not as self employed?

that makes sense. If I am salaried it doesn't make sense for them to ask for financial statements of the company. but since I own the company they might. but who knows!

 

[s898]

Since when? If you are a sole proprietor they will ask for bank statements instead of a payslip.

Wouldn't they also ask for 3 years financial statements etc as a self-employed person?

 

[rietrot]

Yes banks give homeloans to self employed people, I not sure it it will be a 100% loan and you'll have to prove your income with bank statments for up to 6 months.

 

[TheMightyQuin]

Wouldn't they also ask for 3 years financial statements etc as a self-employed person?

I did not tell them I am self-employed.

I told them I work for [insert my company name here] and gave them 3 month's payslips.

 

[d0b33]

I did not tell them I am self-employed.

I told them I work for [insert my company name here] and gave them 3 month's payslips.

I had the same bright idea once. Then I realised it would fraud.
Edit: I missed the earlier post. Probably not fraud.

 

[blah99]

I had the same bright idea once. Then I realised it would fraud.

It's not fraud if you pull a salary and get a payslip every month.

 

[TheMightyQuin]

I had the same bright idea once. Then I realised it would fraud.

 

[neoprema]

How does it work if you're a shareholder and an employee? Is that considered self-employed or not?

Company A is owned by persons A,B,C who are equal shareholders.

Person B is also employed by the company as a consultant. Is Person B considered self-employed or not? Considering that tomorrow, the company CAN fire Person B if they don't work, without changing the fact that they're a shareholder. How do banks handle the differentiation between a shareholder and an employee?

 

[jezzad]

I recently applied for a bond and had to submit both freelance (self-employed) income as well as my normal 9 - 5 income to cover the income needed for the application.

Full-time job was simple - supply payslips and bank statements

Freelance income was a little more tricky, had to supply a ton of bank statements, my management accounts for two years as well as my tax returns from the previous two years.

Something they dont teach you at school is banks use tax returns to gauge company income, so getting an accountant and someone who knows what they are doing pays for itself.

Trying to avoid paying tax can eventually bite you in backside.

Technically I dont earn a salary from my business, but all of my expenses are covered because I have a home office.
The money I do use from the business goes down as a loan.

My first application was declined even though I was putting down a 50% deposit, I managed to get hold of someone who actually gave a dam at the bank and managed to help guide me on the paperwork and documents they needed to support my application.

Weird thing is that my bond now is half of what the rent on my property would be and I would have easily been able to qualify for the rental amount via an estate agent.

 

[s898]

I recently applied for a bond and had to submit both freelance (self-employed) income as well as my normal 9 - 5 income to cover the income needed for the application.

Full-time job was simple - supply payslips and bank statements

Freelance income was a little more tricky, had to supply a ton of bank statements, my management accounts for two years as well as my tax returns from the previous two years.

Something they dont teach you at school is banks use tax returns to gauge company income, so getting an accountant and someone who knows what they are doing pays for itself.

Trying to avoid paying tax can eventually bite you in backside.

Technically I dont earn a salary from my business, but all of my expenses are covered because I have a home office.
The money I do use from the business goes down as a loan.

My first application was declined even though I was putting down a 50% deposit, I managed to get hold of someone who actually gave a dam at the bank and managed to help guide me on the paperwork and documents they needed to support my application.

Weird thing is that my bond now is half of what the rent on my property would be and I would have easily been able to qualify for the rental amount via an estate agent.

Damn! banks just love pay slips. I think I would've been completely demotivated upon the first rejection. Kudos to you for going through the process. Was your business income more than the regular income from fulltime employment?

 

[jezzad]

Damn! banks just love pay slips. I think I would've been completely demotivated upon the first rejection. Kudos to you for going through the process. Was your business income more than the regular income from fulltime employment?

I had two choices, buy my place at half the monthly cost or rent at double the cost. So the decision was pretty much made up for me. We also found a place we both liked and had to be persistent especially in the price range and amount of competition by other buyers.

My full-time work and freelance work monthly income was pretty much the same. Obviously I loaded my expenses toward the business to reduce my full-time work expenses.

I didn’t draw an actual salary but if I needed money for a holiday I would draw from the business as a loan.

I did however have to supply a letter from my accountant confirming my monthly salary if I had to draw one. This was combined with my full-time salary to calculate affordability.