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Yes. CIS subcontractors get mortgages, and there are two ways a lender can look at you. Some work from your CIS payslips or deduction statements and treat the gross figure much as they would an employee’s salary. Others treat you as fully self employed and work from your SA302s and tax year overviews. I have placed cases both ways. Which route suits you depends on how long you have been in CIS and what the income looks like. This post is part of my self employed mortgage hub, where every guide I have written for sole traders, directors and contractors sits in one place.
What is CIS, and why does it matter for a mortgage?
The Construction Industry Scheme is HMRC’s way of collecting tax from construction subcontractors. The contractor who pays you deducts tax before the money reaches you: 20% if you are registered for CIS, 30% if you are not, and nothing at all if you hold gross payment status. Those deductions count as advance payments towards your tax and National Insurance bill. You are self employed for tax purposes, you register for Self Assessment alongside CIS, and the true bill is settled when your return goes in.
That matters for a mortgage because the money landing in your bank account is not the number a lender should be working from. The 20% deduction is a flat advance, not your actual tax, and the payment and deduction statement from your contractor shows the gross figure above it. Lenders that use CIS payslips work from that gross figure. Lenders that treat you as self employed work from the net profit on your tax calculation, which is after expenses and usually lower.
Some lenders work from your CIS payslips and treat the gross figure much like employed pay.
Others treat you as fully self employed and work from your SA302s and tax year overviews.
I have placed cases both ways. Time in CIS and the shape of the income decide the route.
Do lenders use CIS payslips or SA302s?
On the payslip route, the lender takes your CIS payslips or deduction statements for the last three, six or twelve months, depending on its rules, and annualises the gross figure. Because the figure is gross and before expenses, it is often higher than anything a tax return would show. The trade off is that fewer lenders offer this route, and the ones that do have their own minimum history and their own way of averaging.
On the self employed route, the lender asks for your SA302 tax calculations and tax year overviews, usually for the last one or two years, and works from net profit. That is the same treatment any sole trader gets. More lenders offer it, but the expenses you have claimed reduce the income the lender can use. If you are not sure what those documents are, my post on what an SA302 looks like and my guide to proving self employed income both walk through them.
What I have seen in my own casework
I have placed CIS cases on both routes. On one, the lender worked from the client’s CIS payslips and treated the gross CIS income much like employed pay, which gave a figure well above what the tax returns would have supported. On another, the lender took the SA302s and assessed the client as fully self employed, because that was the route that fitted how long they had been in CIS and how the income had come through. Neither route was better in the abstract. The time in CIS and the shape of the income decided it.
One case is not a rule. Every lender has its own criteria, every application is assessed on its own facts, and what worked for one subcontractor may not be open to another. If you want to know which route your own figures point towards, that is worth a conversation before you apply anywhere.
How many months of CIS payslips do I need?
Three months, or thirteen weeks if you are paid weekly, is the shortest I have seen a lender accept, and it usually comes with a condition that you have a longer history in the trade. Six months and twelve months are both common minimums. The more time you can show, the more lenders are open to you, and once you have a filed tax return the self employed route becomes available as well.
Time in CIS is the first question I ask, because it decides which route is even possible. Someone three months in has one or two options. Someone twelve months in with a return filed has both routes and a much wider field.
Speak to an expert
Working under CIS? Send me your last few deduction statements and your latest tax calculation if you have one, and I will show you what each route does with your figures before you commit to anything.
What I would check first
The first thing I check is how long you have been in CIS and what you did before. Someone who was employed in the same trade before going self employed reads very differently to a lender from someone new to construction, because the income has continuity even if the paperwork does not.
The second is whether the gross figures on your deduction statements line up with the credits on your bank statements. Cash work that never touches the account cannot be used, and underwriters compare the two line by line.
The third is your deduction rate. Statements showing 30% mean you are not registered with HMRC for CIS, and some lenders will want to know why. Registering is straightforward, and the tax side of that is a question for an accountant rather than for me.
The fourth is whether you have filed a tax return yet and what the net profit shows. If the payslip route is not available for your circumstances, the SA302 route needs at least one filed year, and the expenses claimed on it will shape the figure.
After that it is deposit, credit history and the property, the same as any other application. Every case is different, and the decision is yours. Call me on 01425 203055 or book a 15 minute call and I will put both routes in front of you with your own numbers.
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