New five-year mortgage products have been introduced by Barclays last week, with one particular deal allowing contractors to take advantage of the current low interest rates with the security of a fix in the future.

Barclays has now launched a new five-year tracker-to-fix mortgage deal that comprises a two-year tracker rate followed by a three-year fix. These hybrid deals have become more popular with contractors that want the benefit of a tracker rate while the base rate remains low, but also want the security of fixing their rate for the future.

Another option could be a switch-to-fix mortgage, also known as “droplock” loans, which work in a similar way but do not specify the future fixed-rate.

These mortgage deals enable contractors to take out a tracker rate but then move on to a fixed-rate deal – with the same lender – without incurring any early repayment charges (ERCs). But the potential downside is that the lender’s fixed-rates are likely to have risen by the time the borrower decides to switch, and may not be the most competitive on the market.

We believe that the Barclays Hybrid tracker-fix deal offer greater benefits over the switch-to-fix option, as it provides you with a predetermined fix so that you know where you stand with future payments.

Contractors that do not expect interest rates to rise significantly over the next five years might be better off selecting a lifetime tracker deal with a low ERC, or an offset discount variable deal with no redemption penalties.

Trying to “beat” the market is always difficult and it is wise for First Time Buyers to look at the fixed hybrid deals for security.

Unlike most banks and building societies that assess your affordability based on a very narrow margin of salary and dividend drawings, which is unlikely to give true reflection of your earnings potential, Barclay’s assess your affordability based on retained profits held in the company. This enables most contractors to borrow substantially more than they would if based on salary and dividends drawn. In some cases, Barclay’s will accept one year’s accounts, but this will also be based on the individual merit of the contractor.

If you have any questions about Barclay’s Hybrid mortgages please contact us on 020 8421 7999.

Freelancer Financials are Contractor Mortgage Specialists and financial services to freelancers. We are Financial Advisers that are directly regulated and authorised by the Financial Services Authority.

Our Contractor specialist mortgage advisers are on hand to help with your current or future requirements today.

For many contractors, tax is the largest single issue you have to deal with. A pension investment allows you to reduce the amount of tax you will pay next January but you need to act before April 5^th.

For many self-employed contractors, 31st March is also the end of company tax year, which overlaps conveniently with the financial year end on 5th April 2012. Making the correct decisions prior to 5^th April enables you to potentially save large amounts of company tax and personal tax.

Most contractors will draw a low salary and sufficient dividends to cover their day to day requirements before having to settle their corporation bill. However, a contribution into a pension from your Limited Company will allow you to substantially reduce your corporation tax bill.

How much can I Contribute?

Due to the large tax breaks linked with pension investments, we are constantly asked “how much can I contribute in a given tax year”. We’re delighted to inform you that funding a pension through your Limited Company allows you to contribute up to £50,000 per annum.

Pension Summary:

• Pension contributions paid by your Limited Company are one of the best ways to reduce Corporation Tax. The contributions are treated as a tax deductable expense to your business.
• The new pension “Carry Forward” rules allow contractors to contribute any unused annual allowance from the previous three tax years. Providing a fantastic tax planning opportunity to those contractors that have accumulated large retained profits in their business.
• Contractors with their own limited company should endeavour to make gross company pension contributions before the end of their company tax year.
• The maximum individual life time allowance for a pension scheme is £1.8 million in 2011/12. This limit will be reduced to £1.5 million from 6 April 2012.
• Contracting in/out of the second state pension (S2P): For most contractors who pay a relatively low salary (e.g. £7,000), it is beneficial to be contracted IN, to the S2P.  The reason is that you receive a top up to your basis state pension (called an additional state pension) based on earnings of £14,400 (called the Low Earnings Threshold).

With so few tax breaks available to contractors, we encourage you to take advantage of this opportunity before April 5^th, not only for the tax relief but also to ensure that you have put aside savings for your retirement.

We have included below a Simple Guide to End of Year Tax Planning  which you can download as a PDF document.

If you want to understand more about what your options are for setting up a flexible contractor pension please contact us on 0208 421 7999 and we will arrange for you to speak to a contractor pension specialist.

The Financial Services Authority (FSA) recommends that anyone looking to enter into a drawdown arrangement seek professional advice before doing so. We have teamed up with Wealth Matters to help advise you on retirement planning in the most tax efficient way.

A pension drawdown lets you take up to 25% of your total pension savings as a tax free lump sum, leaving the balance of your pension savings to grow.

The flexibility provided by a pension drawdown suits many contractors looking to unlock their tax free cash early to help clear debts, pay off their mortgage or even help their children get a footing on the property ladder. You don’t have to stop contracting in order to take your benefits. But it is important to keep in mind that if you do take a drawdown you are reducing the funds available for when you retire.

Annuities versus Drawdown

Most people on reaching retirement typically buy an annuity to safeguard their income. An annuity plan provides an income for the rest of your life, irrespective of how long you live. But once you purchase an annuity it can’t be altered.

Advantages of a pension drawdown

A pension drawdown offers you a degree of flexibility in terms of the way you work. When you reach 55 you can assume a staged retirement and potentially draw down 25% of your pension fund as a tax-free lump sum to purchase an annuity to provide a fixed income for life. This enables you to carry on investing your Ltd Company profits into your pension pot, allowing it to continue to grow.

One major advantage of opting for a pension drawdown is that if you die then the remainder of the fund is paid to your beneficiaries as a capital sum, unlike annuities.

The advantages of Pension investments for Limited Company contractors

Pensions still remain one of the most tax efficient mechanisms for contractors to transfer company profits out of their Ltd Company.  You can make pension contributions directly from your limited company saving you considerable amounts of both corporation tax and personal tax.

No matter how small your salary and dividend drawings are you can potentially make tax free contributions from your Ltd Company of up to £50,000 a year. Furthermore, if you have NOT utilised your preceding three years pension allowance you could potentially contribute up to £200K in any given year.

If you’ve recently started contracting and want to understand what your options are for setting up a contractor pension please contact us on 0208 421 7999 and we will arrange for you to speak to a contractor pension specialist.

The tax break first launched by the labour party was expected to be made permanent by the coalition party. However, the Stamp Duty tax break for properties valued up to £250,000 will be axed from the 24th March 2012.

The first time buyer tax break relates to residential properties up to £250,000 and it means that if you are a genuine first time buyer (i.e. you have never owned a property) then you will not have to pay Stamp Duty tax on your purchase. This saving of up to £2500 is NO small change for first time buyers struggling to get onto the property ladder.

Our mortgage advisers have been put on red alert to prioritise the influx of enquiries from first time buyers eager to beat the tax break deadline. Before making an offer on a property it is vital that you establish first whether the seller is in a chain and whether they will be able to complete the purchase before the stamp duty deadline of 24^th March.

Contractor Mortgages offered with a minimum of 10% deposit

Our unrivalled service in the Contractor Mortgage Market makes us the preferred choice for contractors and freelancers looking to secure their first mortgage. We recognise all the problems you will face trying to get a mortgage and we’ve got the solutions! So if you’re looking for a mortgage – please talk to us. We have negotiated competitive rates that only need a 10% deposit from contractors, and the best part is that you will be assessed on your daily contract rate, no accounts, P60 or payslips required. Even if you are in the first week of your first contract, we have the solution.

This is the perfect time to take advantage of the tax break, especially for those contractors living in rented accommodation. With rents going up, especially in the south east, why continue lining the pockets of your landlords.

It’s crucial You Don’t attempt to Get A Mortgage On Your Own

With time running out, you need an experienced mortgage specialist on your side – Our contract based mortgage underwriting and close relationships with senior underwriters means you can have peace of mind and confidence that your application is being handled by experts. We guarantee that your mortgage will be handled promptly, without unnecessary delay or fuss. We’ll take care of everything for you, to acquire your mortgage before the March deadline.

Waste no time, speak to one of our specialist mortgages advisors today on 0208 421 7999 or complete our call back form to find out more

This doesn’t just relate to contractors and freelancers as recent data indicates that around 40% of mortgage holders in the UK have not taken out cover that guarantees that their families and dependants will continue to be able to pay off the mortgage in the event of their death.

Mortgage repayments are one of the largest financial commitments you will have, so it only seems prudent that people take the necessary steps to protect that commitment. Many of the reasons provided for not taking life cover is that it is low on the list of people’s priorities or that their household budgets do not stretch that far.

Unlike permanent employees, self-employed contractors and freelancers do not have the benefit of a “death in service” policy providing cover of up to 5 times salary. It is left entirely up to you to make separate arrangements to protect your family and dependents in the event of death.

Are your home contents more valuable than your life?

Most contractors have no problem arranging home insurance, car insurance or professional indemnity cover, so it seems shocking that they are valuing their personal possessions over the financial security of their family and kids! We recently received a call from an IT contractor who was more concerned about insuring his laptop than protecting his family! In the past most lenders included life cover with the mortgage, but due to FSA regulations you’re not obliged to take this cover now.

If you’re prepared to insure your pets or subscribe to Sky TV then you should, without hesitation, protect your family from the impact of death. The loss of a partner or parent can be shattering but the loss of a main income earner can have a devastating additional impact on the family left behind.

Taking out a life insurance to cover a mortgage can offer self-employed freelancers the peace of mind that comes when you are able to go about your life in the knowledge that both you, and your family are protected as much as possible from potential future events.

For a moderately price premium you can insure, to a level of your choice, an amount that will be paid out to your family and kids.

If you wish to be contacted about a Life Policy, please request a call back from one of our protection advisors or contact Robin Black on 020 8421 7999 or email protection@freelancerfinancials.uk.com

Limited Company Contractors can now save tax with company funded Life Cover. A new wave of life insurance cover “Relevant Life Policies” is grabbing the attention of contractors in a major way. If you’re a Limited Company director and you have a standard life insurance policy to protect your family, you’re paying more tax than you need to.

A Relevant Life Policy allows contractors to take advantage of a legal trust arrangement to deduct the corporation tax from the premiums, without any benefit in kind repercussions.

Some of the key benefits include:

• Premiums paid by the company are not treated as income
• Premiums may be allowable as a business expense
• Benefits are normally paid free of income and inheritance tax to your dependants

If you currently don’t have life cover or pay for your insurance through your personal account, then this could be the perfect policy. The advisors a Freelancer Financials can handle the complete application process from start to finish. If you wish to be contacted about Life Cover, please request a call back from one of our protection advisers or contact Robin Black on 0208 421 7993, email robin@freelancerfinancials.uk.com

2. Protect yourself against Illness or Injury with an Income protection Policy

Can you survive on £81.60 per week if you are unable to work due to illness or injury? That’s what contractors are entitled to through state benefits. We strongly recommend that all self-employed contractors should protect themselves against possible loss of income due to ill health.

A  Contractor Income Protection Policy will pay (tax free) up to 65 percent of your monthly income to protect you if you are unable to work.

3. Time to Remortgaging if you’re sitting on a standard variable rate

If you’re on a standard variable rate, it may be a good time to consider remortgaging. Those contractors with a low Loan-to-value mortgage can potentially reduce their monthly payments by switching lenders. In recent weeks, wholesale mortgage rates have increased due to concerns over the Eurozone crisis. Although this in unlikely to affect the Bank of England base rate, it will probably force those lenders with limited funds to increase their standard variable rates (SVR).

Switching your mortgage as a contractor is much simpler than you think, we can secure you competitive rates from a number of  high street lenders (or even your existing lender) based on your contract rate alone.

For more information on contractor mortgages contact Freelancer Financials on 0208 421 7999.

The Bank of England announce that a number of high street lenders were planning to introduce more innovative deals on high loan-to-value contractor mortgages – those where borrowers, like most first-time buyers, have smaller deposits.

But lenders also stated that the credit scoring criteria for granting high loan-to-value mortgages would be tightened. One of the main reasons for this is due to the impact of tighter wholesale funding conditions and the impact of the Eurozone financial crisis.

Many lenders are concerned about the economic outlook, future availability of funds and the possibility of falling house prices.

Recent statistics showed that more and more first time buyers are finding themselves trapped in the rental sector. However, those contractors that kept an eye on their credit score and who have a 10% deposit can now look forward to getting on the property ladder.

Nationwide will also be making changes to other selected fixed rates. Read on for a summary of the changes:

Option 1: For contractors with a small deposit

5.29%, 2 Year Fixed Rate at 90% LTV, £999 Product fee, discounted to £500 for first time buyers

Option 2:

3.59%, 5 Year Fixed Rate at 70% LTV, £999 Product fee, discounted to £500 for first time buyers

Product fees shown above include a non-refundable booking fee of £99. Rates correct at time of publication.

Nationwide also allow us to reserve products without an offer on a property being made

Our contractor mortgage advisers are on hand to help with your current or future requirements today.

Freelancer Financials provides mortgages for contractors based on contract rate alone. We take the hassle out of obtaining a mortgage, or remortgage, because we have special relationships with senior underwriters who understand the way you work!

If you’re a contractor working through your own Limited company, and you’re finding it difficult to arrange a mortgage, a contractor mortgage may be what your need.

How does a contractor mortgage differ from a normal mortgage?

In basic terms, there is no difference. The same mortgage products available for normal mortgages are also made accessible for contractor mortgages. The only differences that divide the two are the underwriting and lending criteria. Interest rates for contractor mortgages are no different to standard mortgage products available to your employed counterparts. In simple layman’s terms a contractor mortgage is a mortgage arranged for a contractor who is unable to be assessed on a self-employed basis because they are unable to provide 2-3 years accounts or their drawings don’t reflect a true assessment of the affordability. Lenders that offer contractor based underwriting will typically base their assessment on a combination of specific factors that are unique to each contractor’s employment status to make a decision on whether to accept the mortgage application.

The following factors need to be fulfilled for contractors to be assessed in this manner:

1. The daily/hourly contract rate of the borrower?
2. The duration of the current contract and when it comes to an end?
3. The trading and payment structure in which the contractor operates? E.g. Limited Company or Payroll Umbrella?
4. Occupation? Are you a IT programmer, Engineer, Business Analyst or Accountant
5. Length of time contracting? Have you just started contracting or have you renewed/extended your contract?

The above information forms the basis for contractor based underwriting, so it is vital to come prepared with all this information when you speak to our mortgage advisers. The above information enables us to bypass the normal self-employed underwriting criteria which require accounts. If you approach a mortgage broker and they don’t ask the above questions then you’ve approached the wrong mortgage broker. Obviously the size of the mortgage loan in relation to the price of the property, referred to us Loan to Value (LTV) will determine the competiveness of the rate you can secure. The larger the deposit your are willing to put down the better the rate the lender is willing to offer. Contractor mortgages start at 90% LTV, which means you will need a minimum deposit of 10%. Another critical factor determining whether you can get a mortgage is your credit history and score. We recommend that you check your credit score before you apply for a mortgage; this can be achieved by going online and using Experian or Equifax.

A contractor mortgage is no more expensive than a standard mortgage sourced by permanent employee as long as you seek help a contractor mortgage specialist that is experienced working with contractors.

Unfortunately 2012 isn’t looking any healthier than 2011, for the UK economy or the housing market. There’s no positive news regarding signs of an end to the European crisis and, and since this is the UK’s largest trading partner, this will continue to burden our exports at a time when the UK is dependant on European trade to help its revival. The worsening labour and employment conditions and high inflation are already restricting household expenditure, while austerity measures are limiting public expenditure.

Against this background the UK economy is not likely to increase by more than 1% in 2012 – far cry of the original forecast or 3% growth rates that were the standard before the start of the financial crisis.

A slight shift in favour of contractors seeking to purchase a house in 2012

Every cloud has a silver lining – this may be the case for contractors who are planning to buy a property this year. Conditions are likely to remain challenging this year, discouraging many buyers.

The good news for contractors is that there are hints that a flood of properties are about to hit the market. The housing market in 2012 is looking dim with low activity indicating that house prices could down further during the course of the year.

This will present a good opportunity for contractors looking to secure a contractor mortgage in 2012. A small number of mortgage lenders are now offering contractor mortgages at 90% Loan to Value.

For more information or a guide to arranging a mortgage as a contractor please read our article step-by-step guide to contractors buying a house and arranging a mortgage.