Possibly the biggest hurdle standing between the self-employed and securing a mortgage is proving that they have adequate income to service the loan. Gone are the days of self-certification and now every applicant must provide irrefutable proof that their income is sufficient.
Part of the problem may lie with your accountant who will see it as part of their job to minimise your tax bill by using perfectly legitimate methods to reduce your taxable income. While this may serve its purpose by saving you money on your annual tax bill it can also go against you when trying to prove affordability to a lender.
Some of the documents a lender may ask to see include but are not limited to.
An SA302 is effectively a receipt from the HMRC, it will confirm to the lender how much tax you have paid on your earnings. Most lenders will request 2 or 3 years SA302’s.
Your SA302 will include your tax reference number, year of reference, name, income received before tax is deducted, income on which tax is due, any tax credits received and total income tax due.
If you complete your own tax returns you should be able to download a copy of your SA302’s from the HMRC’s website or you can request them directly yourself. If you use an accountant they should be able to provide you with a copy.
In addition to an SA302 some lenders may also ask for an accountants reference. This is usually a short letter that has been stamped and signed by your accountant to confirm that all of your tax affairs have been pad in full and that there is nothing outstanding.
All Self-employed persons should have separate Bank Accounts for their business and personal affairs. The majority of lenders will ask to see 6 months worth of statements and some may even ask for a years worth.
These statements will be assessed by an underwriter to confirm that your business is both sustainable and profitable.
Should you need any more information on proving your income please contact a mortgage broker today. Mortgage Adviser NI will never charge a fee for our services and we deal with self-employed applicants on a daily basis.
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