For CIS contractors, securing a CIS contractor mortgage can be far more achievable than many think. The key advantage of applying for a mortgage as a CIS subcontractor is that lenders can assess your gross income rather than your post-expense, taxable income. At Quanstrom Financial, we specialise in helping CIS contractors secure the best possible mortgage deals.
What is the CIS Scheme?
The Construction Industry Scheme (CIS) is a system of tax and National Insurance contributions for contractors and subcontractors in the construction industry. Subcontractors pay tax on net income (gross income minus allowable expenses).
The Challenges for CIS Contractors
Mortgage lenders traditionally look at your taxable income to determine your borrowing power. For CIS contractors, this can be problematic because:
- Only 80% of CIS tax is deducted, leaving a large bill at the end of the year
- Expenses are deducted before tax assessment, significantly reducing your recorded income
- This creates a mismatch between gross and net income, making traditional lenders cautious
The Solution: CIS-Aware Mortgage Lenders
Some specialist mortgage lenders understand the CIS scheme and will assess your borrowing power based on your gross income rather than your net (taxable) income. This can dramatically increase your borrowing potential.
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How Much Can You Borrow?
With a CIS-aware lender, you could be eligible to borrow:
- 4-5 times your gross annual income (or even more with some specialist lenders)
- Based on your last 2-3 years of accounts
- Even if your taxable income is much lower
Example:
A CIS subcontractor with gross income of 60,000 but taxable income of 30,000:
- Standard lenders might offer 4-5 x 30,000 = 120,000 - 150,000
- CIS-aware lenders might offer 4-5 x 60,000 = 240,000 - 300,000
This is a significant difference that could be the key to unlocking your property goals.
Documentation Required for CIS Contractor Mortgages
When applying for a CIS contractor mortgage, be prepared to provide:
- Last 2-3 years of accounts or tax returns
- SA302 forms and tax year overviews from HMRC
- Evidence of current CIS engagement with contracts or payment schedules
- Bank statements showing recent transactions
- Credit report
Interest Rates for CIS Contractors
While CIS contractor mortgages are available, interest rates may be slightly higher than those for employees with stable incomes. However, specialist lenders have become increasingly competitive in this space.
Fixed vs. Variable for Contractors
Many CIS contractors prefer fixed-rate mortgages because:
- Income can fluctuate with the volume of contracts available
- Fixed rates provide certainty and budget stability
- You're protected from rate rises
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Other Considerations for CIS Contractors
Changing Contracts
Lenders may be concerned if you frequently change contracts or clients. Continuity of work in the same industry is preferable.
Gaps in Employment
Any significant gaps between contracts could raise concerns. However, some specialist lenders are understanding of seasonal variations in construction.
Company Structure
While most CIS contractors operate as sole traders or limited companies, be prepared to show how your CIS status interacts with your company structure.
Final Thoughts: You Can Get a CIS Contractor Mortgage
As a CIS contractor, you shouldn't assume traditional lenders will understand your tax situation. Instead, seek out specialist CIS-aware mortgage lenders who recognise the value of your gross income.
With the right guidance and support, a CIS contractor mortgage is entirely achievable—and could enable you to borrow significantly more than you thought possible.
📞 Ready to explore your CIS contractor mortgage options? Call 01323 364432
📧 Email info@quanstromfinancial.co.uk
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