FTAdviser article: The pros and cons of income stacking

Household income pressures with the cost of living are forcing people to look at other creative income streams. This could be via side hustles or additional jobs. Lenders just want to see a credible, documented and evidenced history of income received by way of payslips or tax returns. Some lenders take 100% of this additional income and others will take a proportion for affordability. They will also want to ensure people aren't spreading themselves too thin. They will pay additional tax but most people are more concerned now with the monthly bottom line.

One of the biggest things to watch with income stacking is whether the additional earnings push you over important tax or benefit thresholds. For parents, crossing the £100,000 adjusted net income threshold can have significant consequences, including losing access to funded childcare hours and Tax-Free Childcare support. Higher earnings can also reduce your Personal Allowance, creating an effective tax rate that is much higher than many people realise. Before taking on extra work, it is worth understanding the wider impact on your finances because a pay rise or second income does not always translate into as much extra money in your pocket as expected. Pension contributions can sometimes be used strategically to reduce adjusted net income and help preserve valuable allowances and benefits but it is worth being aware of what impact income stacking can have.

Concerns often arise when someone has recently taken a second or third job a few months before applying for a mortgage. The lenders want to see a track record of income and employment, especially if their additional income comes from a very small company or family business. Some of the people we speak to work incredibly hard and hold multiple jobs to make sure they have enough money to buy a property and pay the bills once they have moved in. Brokers and lenders ultimately are looking for scheme manipulation and affordability discrepancies, and multiple jobs typically raise a red flag.