Getting a mortgage when you are self employed or taking a directors minimum salary is a lot harder than it seems!

On the one hand you are trying to build a business and investing a lot of time for very little money – one of the few upsides apart from learning to live frugally on much less than you may have earned in your previous paid job (!), is that you may pay little or no tax for a couple (of few) of years.

On the other, you need to show that you have paid tax and have a taxable income on record, if you want to get a mortgage in the near future!

If you are intending to get a mortgage in the next few years, do consider what your taxable earnings must look like on paper to be able to support a mortgage application.

How to evidence your taxable earnings

Lenders and mortgage brokers traditionally ask for a copy of the SA302 for any mortgage application. The SA302 Tax Calculation comes from HMRC and shows the earnings and deductions for each tax year requested.

As soon as you think you may be applying for a mortgage – ring the HMRC Self Assessment Helpline on 0300 200 3310 and request a copy of your SA302. You will need to provide your National Insurance number and 10 digit Self Assessment Unique Taxpayer Reference (UTR) when you phone.

HMRC will tell you it takes about 14 days to come through, which is why you should request it sooner rather than later –  we have seen some come through as quickly as 5 days and other take 3 weeks.

HMRC and Digital Tax Accounts

HMRC are moving everything online, each and every person will have an online digital tax account by 2020. If you have ever accessed your records online or submitted your own tax return, then yours will be online already.

If you don’t have an online account. Set one up now – they need activating with a code that HMRC will post to you once the online application is received. This will also take a couple of weeks to provide so set one up now and avoid the delay later.

https://online.hmrc.gov.uk/login

HMRC ONline

If your Online Tax Account is live… HMRC will tell you that you can print your tax year summary for your mortgage application…

HMRC recognises that getting copies of the SA302 for your mortgage application is a long and painful process, it’s also an unnecessary admin burden on them to take the call, print the documents and send the SA302 out in the post (you can imagine the number of calls they take daily asking for SA302’s) – so in June 2015, HMRC and the CML (Council of Mortgage Lenders) announced that lenders will accept the Tax Year Summaries printed from your Online Tax Account.

Yay!

You should be able to access and print two views of your account.

  • Tax Year Summaries – Are the forms that HMRC and the Council of Mortgage Lenders supposedly agreed would replace the paper SA302‘s. Brokers will tell you that accountants can print this for you – we can’t. Not unless we can access your own personal Online Tax Account. We can’t see the same information from our Agent Online Accounts.
  • Tax Year Overviews – Are a slightly different view. The tax year overview shows even less detail than the Tax Summary produced earlier.

Please note:

  • HMRC Tax Summaries are only available before 2014-15 IF you submitted your own return online. If your accountant submitted the earlier return, then you will have to call and insist on a paper SA302.

However – no-one told the lenders or the brokers!

The CML is supposed to represent the lending industry but we have found that the lenders didn’t agree and are rejecting this online tax summary!! The printed version of the tax summary is very high level, shows very little detail and has virtually no branding so could be knocked up quickly by anyone with a computer. Therefore the lenders won’t accept them as proof of income. they want the old fashioned SA302, issued by HMRC on HMRC letterhead. HMRC are back in talks with the CML.

So for now we seem to be back to square one!!

Activate your online account and get ready for the move to Digital tax Accounts, but if you want to apply for the mortgage – get on the phone and ask for paper copy SA302’s as soon as you can!

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