Mortgage Evidence For The Self Employed
Whether you are looking to remortgage your existing property or get a loan for your first home, lenders are likely to want proof of your income. For those in regular employment this is a simple matter of providing copies of your payslips. For the self-employed, obtaining the required evidence can be a trickier proposition. However, if your record with HMRC is up to date, it is not an impossible task.
The main evidence of income for a self-employed individual is an SA302. This document summarises your taxable income for any given tax year and the tax due on that income. If you already have an online account with HMRC, you should be able to produce SA302s for submitted tax years from there. These are produced in a specific format by the website. The Council of Mortgage Lenders have been working with the loan providers under their purview to get their agreement that these self-procured forms will be accepted as evidence for mortgage applications. It should be noted that, even where such forms are accepted, SA302s for the year ended 5th April 2018 may be considered too old to reliably prove current income. If you are self-employed and planning to apply for a mortgage, you should aim to submit your return for the year ended 5th April 2019 as soon as possible. SA302s for newly submitted returns should be available within 72 hours of submission. Submitting your return early does not bring forward the deadline for paying any tax due. It will also not increase the second payment on account due in July if your tax bill is higher than the previous year.
If you operate through a limited company, then the situation is more complicated. Most shareholder-directors will limit the income they extract from their companies to the minimum they need to cover their bills. Whilst this keeps the personal tax due on this income as low as possible. it may also leave that income too low to satisfy a mortgage lender. Some mortgage lenders will consider the profits available to be drawn down from a personal company when considering applications. Anyone in this situation should consult a mortgage broker to help them find such lenders. It is also worthwhile speaking to an accountant to understand the tax consequences of increasing the income you take from a personal company in order to meet lender requirements.
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