The business owner’s mortgage
The pension, surplus cash, protection and sale-planning gaps you see when arranging a company director's mortgage, and where your permission stops and ours begins.
The pension, surplus cash, protection and sale-planning gaps you see when arranging a company director's mortgage, and where your permission stops and ours begins.
A company director taking a mortgage looks, on paper, like a complicated income case. The salary is small, the dividends do the work, and affordability depends on a business you have to understand before a lender will. You gather the accounts, the tax computation, the accountant’s reference and the dividend history, and you build the case from the company outward.
For a business owner, the business may be their income, their largest asset, their intended retirement fund and their eventual exit, with no plan joining these up. You see all of this while arranging the mortgage.
A sole trader is self-employed. A company director owns a company. There is a legal entity between them and their income, other people may own shares alongside them, staff may depend on the company, and the business has a value that can one day be sold. Each of those facts creates a wealth need, and each can surface in the mortgage case, because arranging the mortgage means looking at the whole picture.
To place the mortgage you already know how this client pays themselves: a modest salary, then dividends on top, with the profit left in the company deciding how much can be drawn. You hold the dividend vouchers, the tax computation and the retained-profit figure in the accounts. Beyond affordability, that structure tells you the client makes decisions about profit extraction every year, and that those decisions may be made for this year’s tax with little thought for the pension, the investment or the eventual sale.
A company can make employer pension contributions for its director, which is one way to move profit out of the business and into the owner’s own name. The accounts show you how much, if anything, the company pays in. Some directors pay themselves in salary and dividends, leave the surplus in the company or a personal account, and contribute little or nothing to a pension. The accounts and the bank statements show this. How much a director should contribute, from the company or personally, and how it should then be invested, is regulated advice, and it is ours to give.
A profitable business can generate more cash than its owner draws. Without a plan, the surplus may sit as cash in the company earning little, or be drawn into a personal account and left there. You may arrange a mortgage for someone who holds a large idle cash balance. Whether that cash should be contributed to a pension, invested, or left where it is depends on the owner’s whole position, and it is a planning question for E&G.
A business owner carries risks an employee does not:
Some of this is protection you may be permitted to arrange, because it is built on life and critical-illness policies. The structuring around it reaches further: valuations, cross-option agreements, trusts, and the way the cover sits with the owner’s estate and tax position. That is ours and our professional connections’. Point out the gap and make the introduction, because business protection involves more than the mortgage cover you arrange day to day.
An owner may intend the business to be the retirement plan, to be sold one day so they can live on the proceeds. Check whether anything has been planned for that sale: whether the company is structured for it, whether the tax that will fall due has been considered, and what the proceeds will do to produce an income. A mortgage for an owner in their fifties may mean the sale is a few years away. The planning around a sale, both before it to prepare and after it to turn a lump sum into a retirement, is regulated advice, and it is ours.
The line is the same as for any client. You can advise on the mortgage and on the protection you are permitted and competent to arrange. You must not advise on pensions, investments or estate and tax planning. For a business owner that means you can place the loan and the personal protection, but you must not tell the client how much to put into a pension, what to do with the company’s surplus cash, how to structure the business for sale, or how to reduce the tax on any of it. Those are ours. You spot that the questions exist, and introduce. The regulated advice is given by Equity & General, authorised and regulated by the Financial Conduct Authority (No. 474163).
You say one sentence at the end of the case: “Now the borrowing is sorted, it would help to have someone look at the pension and what the business should be doing for you longer term. I work with a regulated firm who do that.” Nothing moves until the client agrees and the consent is recorded. A short introduction reaches us: the client’s name, their contact details, and what you noticed, in a line or two. We make contact within a week, the first meeting is a fact-find, free of charge, at which products are not discussed, and you are welcome to sit in. The advice, the administration and the responsibility are then ours, and you follow the relationship in the partner portal.
These are business owners you would be helping with a mortgage in any case:
The introduction gives the client a second relationship for the part of their finances outside your permissions, and your share of the value it builds recurs for as long as the client stays advised. Recurring income of that kind also gives your own firm capital value at exit.
The cover itself is built on protection policies, some of which you may be permitted to arrange. The structuring around it, covering valuations, cross-option agreements, trusts and the tax treatment, sits with us and our professional connections. Unless you are clearly competent and permitted for all of it, flag the gap and introduce.
The accountant prepares the return and keeps the company compliant. The planning around how profit is extracted, how the pension is funded, how the surplus is invested, how the owner is protected and how the eventual sale is handled is regulated financial advice. The two sit alongside each other.
Raising it early leaves time to plan. An owner who hears about it at a remortgage in their fifties has years to prepare. Your part is to notice the sale is coming and offer to introduce the firm that can plan for it.
No. You act within the permissions your firm already holds, which cover mortgages and protection. The regulated advice on pensions, investments, and estate and tax planning is given by Equity & General under our FCA authorisation. You introduce and we advise, so the responsibility for that advice sits with us.
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