High street banks Virgin Money and Clydesdale Bank say they have amended their lending policies for contractors who have been deemed to be working inside IR35 by their employers, following the introduction of the new self-employed tax rules for private sector companies in April 2021.
The two banks, both part of Virgin Money UK, will now offer specialist mortgage lending for contractors working inside IR35. The aim is to offer clear lending solutions for contractors applying for a mortgage after having been affected by IR35 or working through an umbrella company.
The changes make the two banks the latest to adjust their lending rules to reflect the new IR35 legislation, after Halifax made changes to its income and affordability criteria for self-employed workers earlier this year.
Under the new rules, the banks will lend to inside IR35 contractors and those paid via an umbrella company providing they can show the previous two months’ payslips, taking into account gross pay following the deductions of payroll services costs and statutory employer costs, such as National Insurance contributions and the Apprenticeship Levy.
The new policy states that an underwriter would assess applications on a case-by-case basis, due to the “complex contractor situations” that apply when lending to self-employed workers.
Virgin Money’s Head of Customer Acquisition Sarah Green said: “As a bank we understand that contractors need mortgage products that are flexible enough to accommodate their professional and financial situations and that is why, following the IR35 changes, we have made these positive amendments to our lending policy.”
