I am in a bit of a dilemma. I am self-employed and work in the arts. It’s not a particularly high income, at the moment, but I am good at saving money and am really not a big spender. Though I have had to pay out well over £100,000 on rent, estate agent fees, and landlord checking fees over the past fourteen years of private renting. And I don’t want to do the same thing for the next decade!
I have been looking into, and applying for, shared ownership in London for the past 18 months – in order to own a 25% share of a flat worth up to £400,000. Having spoken to the mortgage advisers at my bank, they say they will lend me up to four times my salary.
So, for the past tax year, and for the current one, I am doing what self-employed people typically do to increase their chances of getting a mortgage – I am ‘boosting’ my earnings by not claiming any tax deductible expenses. For example, head shots at £500 a pop, which are essential for my career, my agent’s commission – between 12.5% and 20% plus VAT on every acting job I have. This has increased my income on paper by a significant amount, meaning I can potentially borrow more once an offer on a flat is accepted, which is a good thing!
I don’t know if I should use my savings in another way – to invest in the stock market, prop up my business – or just have an amazing trip to LA!
The downside to this is that it has led to me paying an additional £80 a week tax (as I am self-employed and over the £11,000 personal allowance threshold, my tax rate is 30%). This can be quite stressful, particularly in the weeks where I do not earn anything, like between Christmas and New Year. I was able to save a small amount before, which I have been putting towards a deposit fund. However, I haven’t been able to save at all over the past year. In fact, I have had to actually use up one fifth of the savings in order to be able to pay my tax bill over the months.
So, I am not sure which is better: to try to save, for example, £3000 – £5000/year to keep building a deposit, or to keep on artificially inflating my earnings thus increasing the amount I can borrow by £40,000 (that’s the difference between getting a £60,000 mortgage or a £100,000 mortgage). The problem with saving (as even my friends who managed to save £20,000 a year for six years found) is that house prices are going up quicker than people can save!
Perhaps, in my current position, even my inflated earnings and my hard won savings are too low to be of any use, so I then don’t know if I should use my savings in another way – to invest in the stock market, prop up my business (a not-for-profit theatre company) – or just have an amazing trip to LA before Trump bans me because of my name…