Construction Industry Scheme (CIS) Mortgages
Updated 20th September 2020
What is the construction industry scheme?
The Construction Industry Scheme (CIS) was introduced by HMRC to allow contractors to deduct tax at source.
Individuals must register for the scheme; however, this isn’t compulsory. If subcontractors don’t register for the scheme, then deductions are stopped at source and normally at a higher rate. Remittance slips are usually produced monthly and show how much tax has been stopped and the net amount paid to the contractor.
CIS mortgages are complicated and it will need an expert CIS mortgage advisor to give you all the options available.
Can a CIS worker get a mortgage?
When working under the Construction Industry Scheme (CIS), you are stopped 20% tax at source. Despite this , you will submit a tax return to HMRC at the end of the tax year. When submitting your tax return, you will likely offset certain expenses against tax, such as fuel, tools, phone bills and accountants’ fees. This usually results in you receiving a tax rebate from HMRC.
Most mortgage lenders will class you as self-employed and require a minimum of 2 or 3 years SA302’s or self-employed accounts. This means that most lenders are working off the lower declared income on the tax returns rather than the higher figure on the CIS vouchers. The upshot of this is that most CIS workers find it difficult to borrow the amount they need for a mortgage.
How can I get a CIS mortgage?
There are a small number of lenders who work slightly different, and this is where the benefits of using a mortgage expert is vital. Our experts have access to lenders who take a common sense approach to lending to CIS mortgages. Instead of using self-employed income, they will treat the worker the same as being in an employed role, and work off the higher figure.
How much could I borrow for a CIS mortgage?
Borrowers under The CIS scheme would be assessed in the same way as employed borrowers when it comes to affordability. Affordability with most lenders typically topping out at 4.85 x income. The actual amount of borrowing available will depend on factors including.
- Deposit Levels
- Credit Commitments
- Child Care Costs
Lenders would average the last 3-6 months gross pay, and use this figure to calculate the annual income. In some circumstances they may request 12 months vouchers, this is down to the underwriter and overall strengthen of the case.
If you need to tell HMRC about your earnings, you can do so by clicking here
How much deposit will I need for a CIS mortgage.
With any mortgage the more deposit you have the better the options will be. At present the only 5% deposit mortgages available are through the Help to Buy scheme. Click here to read all about the Help to Buy scheme and all options available.
Ideally you would have 10% as a minimum but 15% would give you the best options.
CIS mortgages with bad credit.
There are options for a cis mortgage with bad credit. The mortgage advisors we work with are specialist in arranging bad credit mortgages.
Lenders may still be able to provide mortgages if you have bad credit. We would always advise you to check your credit report and get the latest copy for your mortgage advisor to look through.
CIS mortgage minimum mortgage criteria.
- 6 Months of CIS vouchers/slips
- 20% Deducted at source and showing on the slips
- 5% Minimum deposit
- Defaults/ CCJs to be registered over 24 months ago
Speak to a CIS mortgage advisor
Our mortgage experts will look at each case before deciding which lender is right for you and your individual circumstances. All the mortgage brokers we work with are whole of market and offer unbiased advice. They will have access to all the specialist lenders to really enhance your chances of achieving the mortgage you need.
The expert brokers we work with have experience in dealing with all aspects of CIS mortgages, and importantly using the whole of the market to access the very best deals available.