Securing a mortgage can be hard enough at the best of times. Couple that with being self employed and the whole process could turn into a bit of a nightmare unless you’re well prepared.
We regularly help clients with providing an accountant’s reference which most lenders will require if you are self employed.
This usually shows the last two or three years financial data, depending on the lender, based upon the income you’ve received from your business; usually a mixture of salary and dividends if you operate your business as a limited company or the profits from your self employment if you’re a sole trader.
Your Tax Calculation
Most lenders will accept your Tax Calculation as proof of your earnings.
The GOV.uk web site says that lenders will accept either:
- a copy of the tax calculation (known as the SA302) printed from your personal HMRC online account
- a tax calculation printed from commercial software often used by accountants to submit returns
Lenders may also want a tax year overview. This can also be printed from your HMRC online account or from the software used by your accountant.
To avoid unnecessary financial outlays or delays in the mortgage application process, it’s vital to check what documentation and evidence a lender will need before you apply for a mortgage or hand over any arrangement or surveyor fees.
Lenders who make life easier
The GOV.uk web site also provides a helpful list of lenders who do accept the tax calculation, known as the SA302, as proof of earnings.
To access the full list – click here.
Six Tips to make the Mortgage Application go smoothly
The key is preparation!
If you work for yourself, either as a sole trader / self employed or as a director of a limited company, before you find your dream house do make sure that you get yourself ready for the mortgage application process ….
- Get your accounts up to date with all the documentation to hand – you will need a profit & loss account and balance sheet
- Go back and find the same for the last three years! You will need at least that to satisfy most lender requirements although some may accept two years
- If you haven’t had your own business for 3 years then you will need your PAYE P60s and / or P45s for the same period. Dig through your filing to have these to hand
- The objective is to have a clear statement of proof of earnings for the last three years. The easiest thing to do is put everything together into a summary of earnings, supported by the relevant documents, that you can provide to a mortgage advisor, lender and your accountant to verify
- If you use an accountant make contact with them. Let them know that a mortgage reference will be on its way. That way you can check their availability and ensure that they will not be away from the office at the vital time that you need them to complete the reference
- If you don’t have an accountant then make sure you find a lender that will accept your tax calculations (the SA302 – see above) as proof of your earnings. Otherwise you’ll find yourself in a position where you’re paying for an accountant to verify earnings just for your mortgage application