Contractor Mortgages with Robert Whelan

 

#AskTheExpert Series: Contractor Mortgages with Robert Whelan BComm, QFA, Rockwell Financial Management. COVID has brought with it many challenges.

With work now untethered from place, and with family ties brought into sharper focus, you may well be considering your plans for a move, and therefore a mortgage.  First time Contractors often fear that taking a contract role means giving up the chance to obtain a mortgage.

Thankfully, that is just not true. In fact, you may be in a position to borrow more as a Professional Contractor, as your income is likely to be greater than that of a permanent employee.

As part of our recent #AskTheExpert series, Robert Whelan BComm, QFA of Rockwell Financial Management outlined universal criteria for obtaining a mortgage and the most common Contractor questions on mortgages.

Read on for a synopsis of what was discussed, as well as a look at how Icon Accounting can help you on your mortgage journey.

Universal Criteria for Getting a Mortgage

The standard benchmarks for permanent employees also apply to Contractors:

- Deposit

- Loan to Income

- Repayment Capacity – Everyone is familiar with the struggle of saving for a deposit, but did you know that your behaviour over the past six months can make or break your mortgage application? Demonstrate that you can meet the mortgage repayment you are likely to have by showing evidence of your ability to pay rent/save to the same amount.

- Credit History – Access a forensic analysis of your own credit history, otherwise known as a Consumer Credit Report here.

Did you know that 10% of all mortgage applications can get an exception to rules such as loan to income, deposit, or net disposable income (mortgage repayments cannot exceed a percentage of your net disposable income – typically 40-45%).

When starting your mortgage journey, be aware of the Central Bank rules on mortgages, and if you are looking for an exception, be exceptional.

For example, if your bank has requested proof of repayment capacity and you wish to be granted an exception on your loan to income, show a larger repayment capacity than asked.

Click here to read Robert’s Top Tips for Contractor Mortgages (the do’s and don’ts to be aware of).

Most Common Contractor Questions on Mortgages

- How long do I need to be contracting before I can apply for a mortgage?

Typically, contractors could apply for a mortgage after 12 months in contract, which would demonstrate a continuity of career. However, post-Covid, the banks may be more reticent to consider an application of under two years. This is sector dependent.

- Will I need a bigger deposit as a contractor/Will I be considered higher risk?

No, certainly not.

- What happens if I leave contracting/How long do I have to wait to apply?

Typically, I would advise ex-contractors to wait until they have been in a PAYE/Permanent position for six months.

- What’s changed post-Covid?

Post-Covid, we have seen turnaround times slow somewhat. We have also noticed a greater scrutiny placed on the sector that a contractor is operating within.

How Icon Accounting can help you on your Mortgage Journey

If you are an Icon client who is applying for a mortgage, we can provide the following

- Certificates of Salary

- Three to six-month payslips

- Letter confirming that taxes are up to date

- Tax Clearance Cert

- Copy of previous three years of tax returns

- Financial statements for your limited/umbrella company

- Bank statements for your limited company

If you have any questions about Contracting, the advisory team would be glad to field your questions. You can get in touch here.

If you are already an Icon client, and have any questions on mortgages, reach out to your Account Manager. If you would like to speak directly to a Mortgage expert, contact 01 2966120 or visit www.rockwellfinancial.ie

If you have any queries when ordering your Taxsaver ticket, don’t hesitate to contact us at taxsaver@iconaccounting.ie and one of our members will be in touch in no time.

Stay tuned for new updates and we will back with all new features again shortly. Icon Accounting the best Accountancy services in Dublin, Ireland.

Budget 2021

 Read our Summary of Todays Budget

Today, the Minister for Finance, Pascal Donoghue, and Minister for Public Expenditure & Reform, Michael McGrath, have announced Budget 2021.

While previous budgets took place against a backdrop of relatively strong economic growth, the backdrop of today’s budget has been the Covid-19 crisis and Brexit.
Since March of this year, we have seen record levels of unemployment and the unemployment rate continues to rise at a high pace due to the pandemic.

Taxation receipts have been stronger than expected, however, the country still finds itself with a deficit of approximately €21 billion for 2020.

The outlook for 2021 is not much better and it is on this basis that most of Budget 2021 has been framed.

Personal Tax

• The retention of existing income tax rates (of 20% and 40%) and tax bands (€35,300 for single individuals and €44,300 for married single earner couples).
• An increase in the earned income tax credit (introduced in 2015 for self-employed individuals) from €1,500 to €1,650 - finally achieving parity with the PAYE credit.
• In a surprise move, the seldom claimed Dependant Relative Tax credit, has seen a jump from €70 to €245. It is estimated that nearly 200 thousand people have a qualifying relative living with them, and they may be more tuned into claiming this now (please note: your children do not qualify you for this credit).
• An increase in the home carer tax credit from €1,500 to €1,600.
• USC rates remain the same, although the bands have changed slightly, to allow for the increase in the minimum wage to €10.20.
• Homeworkers can now claim a portion of their broadband as a tax allowable expense.          
• Children’s allowances are also set to increase €5 for children over 12, and €2 for children under 12, per week, respectively.

Employment and Business supports

• Debt warehousing has been added as a new variant of the employment wage subsidy scheme. This will provide continued support to businesses affected by COVID-19.
• A new scheme, for businesses which have had to close because of COVID-19 Level 3 or higher restrictions, will see grants available of up to €5,000 per week.
• Commercial Rates are to be waived for the rest of 2020.

Corporation Tax

• Changes to the international tax framework were flagged and we should expect Corporation tax to look a little different in future years.

• Corporation tax receipts from multinationals for the first 8 months of 2020 have generated a remarkable €7.5 billion. No changes are made to the headline rate of 12.5% on trading activities, non- trading 25% and surcharges of 20% for estate income and 15% for Professional Services still apply.
• Revised rules for the tax treatment of Intangible assets apply from tonight, this is targeted at the multinational sector, and is linked to a move to a digital tax.
• Digital Gaming Sector – Work will take place in 2021 on the development of a tax credit for the digital gaming sector.

Employers PRSI

• Rates remain unchanged. Though there is a small increase to the weekly income threshold for the higher rate of employers PRSI, this €4 increase brings it to €398 per week.

VAT

• The July stimulus package seen the standard VAT rate drop from 23% to 21% on September 1^st.
• Further VAT cuts were announced in today's budget showing a return to the 9% VAT rate which had previously applied for the tourism and hospitality sector. This change will take place on November 1st.

Entrepreneur Relief

• Changes to this had been suggested by various pre-budget commentators, however, this has been left alone and no changes will take place.
• A slight amendment to the shareholding requirements has been made, allowing some 5% shareholders a greater time span for their qualification to the scheme.

R&D Tax Credits

• No changes to the existing rules in place, and as always, any claim will need to be substantial to ensure value.

Property

• The residential development (stamp duty) refund scheme has been extended until 31st of December 2022.
• The Help to Buy scheme which has proven to be successful for first time buyers trying to get on the property ladder has been extended to the end of 2021.

State Pension

• The planned state pension age increase to 67 has been scrapped.

This will now remain at 66.

Stealth Taxes

• We haven't heard very much of this term of late, but the government have managed to introduce a range of stealth taxes in this budget, primarily for those who a diesel car, have an open fire and enjoy a cigarette!
• The cost of the price of cigarettes has increased by 50 cents.
• Vehicle tax increases, carbon tax increases, vehicle registration tax increases, petrol and diesel increases are all hallmarks of a Green Party power play.

Conclusion

The pandemic has dictated the direction in which this budget was laid before us.

In many ways, lessons learned from 10 years ago are now coming into play, immediate supports for education, reskilling, and retraining are most welcome.
Additional supports for home workers, students studying from home, and those currently receiving the pandemic unemployment payment show that this government is capable of fast response.

Clearly, the health sector will require an enormous amount of funding over the next 18 months, Budget 2021 has achieved this without pain being inflicted on the workers of Ireland.
It remains to be seen if the same scraping and scrimmaging will be available to us in future years.

As always, we will need to see the contents of the Finance Act 2021, where changes, additions and amendments to today’s budget are finalised. 
We will provide further updates when this is published next month.

If you have any queries when ordering your Taxsaver ticket, don’t hesitate to contact us at taxsaver@iconaccounting.ie and one of our members will be in touch in no time.

Stay tuned for new updates and we will back with all new features again shortly. Icon Accounting the best Accountancy Firms in Ireland. 

Digital Detox - Life Hacks

 Do you check your phone first thing in the morning? Do you find yourself scrolling through social media sites? Do you find it hard to step away from your laptop? Are you glued to your tablet when you are in your bed? If so, you might be a good candidate for digital detox.

Sometimes we only take a pause when our battery dies. We are too busy in our tech that we start ignoring the real-world experiences, more so during these strange times. With the advent of working from home we do not know when to step away from our workspace. The logoff button has somewhat been forgotten. 

Here are some of the tips that might help you train your mind to step out of digital world and prioritise your mental and physical health.   

Set App Restrictions on your Phone

Social media in not so social times can ramp up your hours spent on your phone. It is shown in studies that an individual spends 144 minutes/day on social media sites. This time can easily be saved if we start restricting social media app screen time. Start Slow!! Restrict to 120 minutes initially then try to get down to 30 minutes in a day. Suddenly you will find yourself with a lot of time to do other things.  

Use the 20-20-20 Rule

With all the screen time everyday our eyes get tired. We put a lot of strain on them without knowing. 20-20-20 rule is a very good trick to maintain your eye health. Every 20 minutes look at something 20 feet away for 20 seconds.  

Take Mini Breaks

Work can be really busy sometimes. When we are working from home, we forget that we are not taking coffee breaks like we used to in the offices. We quickly grab something to eat/drink and sit back on our desks. Take small breaks to counter this, go for a walk, stretch out, sit in your back garden.  

Say Goodnight to your Devices at Evening

There was a recent survey that suggested using your mobile phones during evenings can disrupt melatonin production, your quality of sleep and your mood. Make a habit to put a bedtime schedule on your phone or put it on do not disturb so that you are not jumping for your phone on each notification.  

Try using the Rule of Thirds 

Divide your life in thirds: 8 hours for sleep, 8 hours for work and 8 hours for what you want to do. Taking time off from work can drastically improve your productivity. Try picking a lost hobby that you always wanted to do. This way you will find yourself spending less time on screen and going back to things that you really like.  Researches have shown that if you spend more than 40 hours a week in work your productivity starts to diminish.  

Let’s start saying no to our phones, laptops and tablets and yes to exercise, family and hobbies during this pandemic.  

If you have any queries when ordering your Taxsaver ticket, don’t hesitate to contact us at taxsaver@iconaccounting.ie and one of our members will be in touch in no time.

Stay tuned for new updates and we will back with all new features again shortly. Icon Accounting the best Accountancy Firms in Ireland. 

How Covid-19 has affected Contractor Expense Claims

 Transport tickets are out & ergonomic chairs are in. Since March 2020 contractor expenses have changed dramatically. With some unsurprising new expense claims topping the charts there are some unexpected newcomers…

We have put together a blog on the top expenses our Contractors have claimed through their limited company during Covid-19.

Overall, the results are very interesting and give great insight into behaviours and thinking within the contracting community over the last 7 months.

With the forced move from office spaces to home working the majority of our clients have now kitted out their homes (and bedrooms) with desks, chairs and extra computer & communications equipment.

Unsurprisingly as a result,  office furniture and computer equipment take the top 2 spending spots in our poll. Within that, the most popular items purchased were monitors and chairs to bring a professional and functional working feel as well as comfort to a home office set up.

Interestingly we have also seen an increase in clients taking out life cover through their limited company and setting up for a pension for a rainy day. Perhaps this is a sign of professionals reflecting on their futures and having a little more time to plan, but also demonstrates the income stability within our community to continue to invest in savings options even in turbulent times.

The top 10 expenses claimed since March 2020 were….

1. Office furniture
2. Computer & Mobile Equipment
3. E-workers allowance & Home Utilities
4. Pensions
5. Upskilling with online courses & platforms
6. Life Insurance Cover
7. Hot desks hire
8. Software Subscriptions, e.g. zoom
9. Stationary
10. Travel

One glaring omission from the list is relocation expenses, which has dramatically decreased given the working at home guidelines in the past months and the restriction of movement. It will be interesting to see in the coming months if travel creeps back up the list from 10^th place or if companies will fully commit to flexible remote working arrangements for the contracting community.

Looking at our list- are there expenses that you might you have missed out on claiming?

Speak to your Account Manager to help you maximise your allowances & make sure you have claimed for purchased items that you may not have considered as a business expense thus far!

Stay tuned for new updates and we will back with all new features again shortly. Icon Accounting the best Accountancy firms in Ireland.