Editor's note: This brief was summarised by The Property AI Newsroom from a report by Mortgage Solutions. Read the original article for full details.

Tax Returns May Not Reflect HNW Borrowers' Current Income, Warns Osman

A guest article published by Mortgage Solutions argues that historical tax returns do not always tell the full story for high-net-worth (HNW) borrowers, whose professional and financial circumstances can change quickly. Written by Serkan Osman, director of Global Finance Partners, the piece examines how lenders are assessing substantial residential borrowing where income structures have shifted.

Looking beyond the historical position

Osman writes that historical accounts and tax returns remain an important part of the underwriting process, providing evidence of established income and helping lenders understand how a borrower's financial position has developed.

The difficulty arises when there has been a material change since those documents were produced. Examples cited include a senior executive moving into consultancy, a partner leaving a professional practice, or an established professional incorporating a new business and beginning to move income into a corporate structure. In such cases, the underlying earning capacity may remain strong, but the evidence supporting it is presented differently.

This is particularly relevant for HNW borrowers, the article notes, because their income is often derived from several sources and can be structured in ways that are less straightforward than a conventional salary. The underwriting question, Osman argues, becomes not simply what the borrower earned historically, but whether there is sufficient evidence to understand and support their position today.

Newly established businesses

Newly incorporated companies add another layer of complexity. Without completed accounts or an established trading history, a lender may have limited traditional financial information on which to base its assessment.

However, the article stresses that the absence of filed accounts does not necessarily mean an absence of underlying income. There may already be contracts in place, invoices raised, established client relationships, management information and a demonstrable pipeline of future work.

The challenge, according to Osman, is bringing that information together in a way that allows the lender to assess income sustainability and distinguish between a genuinely uncertain position and a business that is simply too new to have produced conventional accounts. Accountant commentary and up-to-date management information can be particularly useful in providing that additional context.

The wider financial picture

For HNW clients, the article argues that income should rarely be considered in isolation. Property holdings, business interests, liquidity, existing borrowing and the nature of future income can all provide important context when assessing a substantial mortgage, particularly where circumstances have evolved but the overall financial position remains strong.

Different lenders take different approaches, Osman writes: some may place greater emphasis on historic income, while others may consider a broader range of evidence where circumstances warrant it. Understanding those differences, he suggests, is an important part of approaching complex lending.

The article also touches on capital raising, noting that where a borrower seeks to release significant capital from a residential property, the purpose of the funds and the wider circumstances will be relevant to the lender's assessment.

For letting agents and inventory clerks, the piece is a reminder that even high-value landlords and buyers may have income profiles that look very different on paper from their actual financial position, something that can shape expectations around purchase timelines and complex transactions.