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CIS Mortgage

CIS is short for ‘Construction Industry Scheme’ and was set up by HM Revenue & Customs (HMRC) as a way for people who work in construction to pay tax.

Self-employed individuals and sole traders can find it challenging when applying for a mortgage due to the way lenders calculate affordability based on net profit figures, which then results in being offered a lower mortgage loan.

CIS mortgages allows you to improve the way your income is presented to a lender.

Post Topics

What is CIS and who is eligible?

How can I get a mortgage using CIS?

Next steps




What is CIS and who is eligible?

A construction worker or businesses that take part in construction work can qualify to be registered on HMRC’s Construction Industry Scheme.

The purpose of the scheme is to allow contractors who work in the construction industry and registered to the CIS scheme, the ability to deduct money from a subcontractor’s pay and pass this directly on to HMRC. These payments are counted as advance payments towards the subcontractor’s tax and national insurance contributions.

A registered subcontractor to CIS will be taxed at the source at 20%. Although it is not compulsory for subcontractors to be registered, it is beneficial to be registered as you will be taxed at a higher rate of 30% if unregistered.




How can I get a mortgage using CIS?

You must be registered on the CIS scheme to qualify for a CIS mortgage. By using CIS as part of your mortgage loan application, lenders will take into consideration your net income, rather than your net profit, as part of their decision on how much you can borrow.

This is extremely beneficial as workers in construction tend to write off expenses such as fuel, tools and other allowable expenses against their income for tax reasons, but this can reduce their net profit amount which is why lenders may allow less to be borrowed if they are basing income on this figure.

Generally, when applying for a mortgage, you will be required to present three to six months’ worth of CIS payslips and corresponding bank statements. In some cases, you may be required to show more and having more could help strengthen your application. If you are not part of the CIS scheme and don’t have CIS payslips to show, you may find that you’ll need to provide previous two to three years’ worth of accounts. Lenders will use these payslips and your outgoings to calculate how much they believe you can afford in monthly mortgage repayments and how much they are willing to lend to you.

Just like standard mortgage applicants, you will be required to have a minimum of 5% deposit although in some cases lenders may require a higher deposit. The more deposit you have, the better your chances of receiving a mortgage offer and you may be able to access better deals with better rates.

As usual, lenders will want to verify your address so make sure you are registered on the electoral roll as it may cause issues with your application if you are not registered. Lenders will also want to check your credit score, so it is a good idea to check this yourself before your application is submitted so you can check if there are any discrepancies in your credit history or things you can do to improve your score. Your credit score provides lenders with an indication into your reliability as a borrower so having a strong credit score will be beneficial to your application. If you have a bad credit score, lenders may still be willing to accept you providing you don’t have defaults and CCJs in the previous 24 months. This will be assessed on a case-by-case basis and lenders will base their decision on the severity of your adverse credit.




Next steps

Being a contractor and self-employed or a sole trader can make trying to get a mortgage more complicated and lender’s requirements can vary lender to lender. We have access to a whole of market of lenders, both on and off the high street including specialist lenders. Speaking with one of our mortgage brokers who can look at your personal circumstances and help advice you with the lenders and products most suited for you can save you time and hassle.