Q. As a new contractor, I am struggling with what to confirm as my income (e.g. on application forms). I pay myself the minimum salary and then fluctuate on dividends. When confirming income on forms, do I simply state I’m an employee and my salary (e.g £10,000pa)? Or should I be averaging my income including dividends? Simply confirming salary would make me appear to be on minimum wage.
A. It really depends on what type of application form you are completing. Technically your salary would be £10,000, but the amount you are ‘banking’ is the combination of salary and dividends.
It can get more complicated with mortgage applications, where different lenders will have different ways of assessing income. In this situation it is probably worth using a specialist contractor mortgage broker, who will know exactly how to present applications from contractors.
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