For a self-employed borrower, a fall in income can quickly become a focal point during a mortgage application.
For a barrister, however, a lower year does not necessarily mean a weaker practice.
Income at the Bar can fluctuate. The timing of work, billing and payment can create significant differences between accounting periods, while career breaks or an unusually strong preceding year can make a subsequent set of figures appear weaker by comparison. Henry Dannell’s existing barrister guidance recognises these natural ebbs and flows, including the effect different accounting periods can have on how income appears.
So, when the latest accounts show a reduction, the most important question is not simply how much has income fallen?
It is why has it fallen?
When A Lower Figure Tells Only Part Of The Story
Consider a barrister whose accounts show income of £250,000 one year and £190,000 the next.
On the face of it, that is a material reduction. An underwriter may reasonably want to understand whether £190,000 represents the new level of earnings and whether the downward movement is likely to continue.
But the figures alone do not explain what happened.
Was £250,000 an exceptionally strong year?
Was the following year genuinely quieter?
Was a substantial amount of work completed but not paid until after the accounting year end?
Was there a temporary period away from practice?
Or did the timing of receipts simply mean income that might ordinarily have appeared in one year fell into the next?
Each scenario can produce a similar headline reduction. Financially, however, they may represent very different circumstances.
Understanding that distinction is central to presenting the case properly.
Did The Practice Decline, Or Did The Income Simply Fall Into The Next Year?
For barristers, there can be a meaningful gap between work being undertaken, fees being billed and cash ultimately being received.
That timing matters.
Henry Dannell’s Journey of the Bar guide highlights the distinction between cash and accrual accounting and how the method used can affect the way a barrister’s earnings appear from one period to another. Cash accounting can show peaks and troughs more starkly because income is recognised when it is received, while accrual accounting recognises income when it is earned.
A set of accounts showing a lower year therefore needs to be understood in context.
If significant fees were generated towards the end of an accounting period but received shortly after the year end, the accounts may show a reduction even though the underlying practice remained active.
The following year could then show the opposite effect, with those receipts contributing to an apparent increase.
That does not mean a lender will automatically adjust the figures or include income that falls outside its normal affordability criteria. It does mean that the timing behind the numbers can be relevant to understanding what has actually happened.
What Sits Behind The Accounts?
Where appropriate, chambers information may help provide further context around the barrister’s current practice.
This could include information relating to work undertaken, payments received and aged debt. Henry Dannell’s existing guidance also refers to lender understanding of aged debt, case completion timelines and the income fluctuations experienced by barristers.
This information can help distinguish between two quite different situations.
The first is a practice where income has fallen because instructions, activity or earnings have genuinely reduced.
The second is a practice that remains strong, but where the timing of work and receipts has created an unusually weak accounting period.
A lender still needs to make its own assessment of sustainable income. But providing the appropriate context can help ensure that assessment is based on a fuller understanding of the applicant’s circumstances.
Sometimes The Income Really Did Fall, Temporarily
Not every lower year is the result of accounting.
There are legitimate reasons why a barrister may experience a genuine temporary reduction in earnings.
Maternity or paternity leave, a career break or other personal circumstances can result in time away from practice and therefore lower income. Henry Dannell’s barrister guidance specifically recognises these ebbs and flows and notes that a temporary reduction followed by a return to full-time practice can complicate mortgage assessment.
The important point is that a temporary interruption and a deteriorating practice are not necessarily the same thing.
An appropriate assessment may therefore need to consider why the reduction occurred, what happened afterwards and what evidence is available to demonstrate the current position.
Again, this is not about asking a lender to disregard a weaker year. It is about helping them understand what that year represents.
Why Falling Income Can Require A Different Approach
Stable or steadily increasing self-employed income is relatively straightforward for lenders to interpret.
Falling income can require greater scrutiny.
A lender may use the latest, lower figure when calculating affordability. It may average income in a particular way or seek further information before deciding what level of earnings it considers sustainable.
Different lenders can also reach different conclusions from the same financial history.
This is why lender selection matters.
The challenge with more complex financial circumstances is often not simply the strength of the client’s position, but how that position is interpreted within a lender’s underwriting framework. Henry Dannell’s wider approach to debt advice centres on understanding those nuances and translating complex financial circumstances into a coherent lending case.
For a barrister with a lower latest year, approaching the market without first understanding the reason for the reduction can therefore be counterproductive.
The accounts may say:
“Income has fallen.”
The wider evidence may show:
“The practice remains strong, but the timing of receipts distorted this particular accounting period.”
Those are not necessarily the same lending proposition.
Understand The Movement Before Approaching The Market
Before considering which lender may be appropriate, it is important to establish what actually happened.
Was it simply a weaker billing year?
Did a significant amount of income arrive after the accounting year end?
Was the previous year exceptionally strong?
Was there a temporary period away from practice?
Has income subsequently returned to its previous level?
What do the latest chambers figures show?
Is there work undertaken or aged debt that provides useful context around the current position?
The answers help determine whether the reduction represents a genuine downward trend, a temporary interruption or simply the timing of income between accounting periods.
Only then can the relevant evidence be considered and the case positioned appropriately.
This is not about explaining away a genuine reduction. If a barrister’s sustainable earnings have fallen materially, that is relevant to affordability and needs to be reflected in the advice provided.
It is about ensuring that a temporary or timing-related movement is not automatically interpreted as something more fundamental.
One Lower Year Does Not Tell The Whole Story
Barristers do not always produce the smooth income profile that conventional self-employed underwriting is designed around.
There can be sharp increases as a practice develops. There can also be dips caused by billing cycles, accounting periods, career breaks and the natural ebbs and flows of practice.
Both require interpretation.
At Henry Dannell, our role is to understand the financial position behind the headline numbers before approaching the market. That reflects our broader approach to specialist lending: bringing coherence to complex financial circumstances and identifying lenders whose underwriting approach may be suited to the individual case.
Where the latest year is lower, we consider what caused the reduction, how the practice has performed since, what supporting evidence is available and how an appropriate lender may assess that information.
Because sometimes a lower year does reflect a genuine reduction in earnings.
Sometimes it reflects a temporary change in circumstances.
And sometimes the work was done, the fees were earned, but the income simply landed on the wrong side of the accounting year.
Understanding which applies can make a significant difference to how a mortgage application is assessed.
A mortgage is secured against your home. Your home may be repossessed if you do not keep up repayments on your mortgage or any other debt secured on it. Mortgage availability and lending are subject to individual circumstances, status and lender criteria.
