Before starting the process of applying for a mortgage, it's vitally important your adviser has access to all the relevant paperwork.
Not only will it allow them to fully understand your circumstances and seek clarification where required, but it means you'll receive your mortgage offer more quickly as well.
With that in mind, we've put together this handy self-employed mortgage documentation guide. We recommend you bookmark it for easy access.
Income proof for a self-employed mortgage
The documents you'll need depend on your business structure, trading history, and the mortgage lender you're applying to.
Most lenders want evidence of your historical self-employed income, although the number of years required and the documents accepted vary between providers. Some lenders will consider applicants with just one year's accounts or trading history.
Your mortgage adviser may also ask for additional documentation before recommending a lender, particularly where your income has changed significantly or your business has a short trading history.
Standard documentation to verify income
Lenders require the following documents for the last two trading years if you've been trading that long. If not, for your first year:
Limited company directors will also need to provide latest payslip if registered for PAYE through their business, and their HMRC submitted statutory company financial accounts, produced by a qualified accountant* for the relevant period(s).
The company accounts must show the:
- Balance sheet
- Profit and Loss statement
- Notes to the accounts.
Please note filleted accounts are not accepted by mortgage providers.
*If you don't use an accountant, let us know so we can advise you.
Accountant's certificates
A few lenders accept an accountant's certificate, either to supplement the above documents or more often, in lieu of them.
The certificate is a form provided by the lender and signed by your accountant verifying business turnover, gross and net profit before tax for sole traders, and post-tax profit, salary and dividends for directors.
Your accountant may also be asked to provide a projection for the current year's trading to provide comfort to the lender that profitability is sustainable.
Documentation to provide if you're a contractor
In addition to supplying the documents above (where applicable). lenders will want to view a contractors current contract. If the contract has renewed, they may request the applicant's previous one too.
If your earnings are high enough, and/or you fit the lenders other criteria, it's often possible to be treated as employed for income assessment. In which case, your contract and bank statements alone can be sufficient to evidence your income.
If you contract through an umbrella company, lenders typically require a copy of your latest contract and P60.
What's an SA302?
An SA302 is an official tax calculation document produced by HMRC after you submit your personal tax return (SA100).
Aside from showing how much tax you owe, the SA302 summarises your declared earnings for the tax year, including pre-tax profits for sole traders, and salary and dividends for company directors.
Other income streams such as investments or rent are also included.
How do I get my SA302?
If your accountant uses commercial accounting software to submit your self-assessment tax return, they should provide you with the tax calculation, or tax computation as it's also known.
This is essentially an unofficial version of the HMRC's SA302 tax calculation, but it's widely accepted by lenders for mortgage purposes.
Even though they are not strictly the same thing, you'll often see the terms SA302 and tax calculation/computation used interchangeably. The latter is often, but not always, referring to the accountant supplied version. Rule of thumb: if you have an accountant, ask them to provide your tax calculation.
If you or your accountant filed your tax return directly via HMRC Online, your SA302 should be ready to print as a pdf file 72 hours later.
To print your SA302:
- Sign into your HMRC Login account
- Go to 'Self Assessment'
- Scroll down the page to 'Previously filed returns'
- Click Get your SA302 tax calculation
- Select the SA302 for the relevant year
- Select 'Save as PDF' and click Save
What's a Tax Year Overview?
The Tax Year Overview (TYO), or Tax Overview as it's sometimes called, is a document produced by the HMRC. It verifies the figures in your SA302 are correct, and shows the tax to be paid by yourself or refunded by HMRC.
The SA302/tax calculation and TYO go hand in hand, and for mortgage purposes, most lenders will want to see both documents for the relevant year(s).
How do I get my Tax Year Overview?
Downloading your TYO documents from HMRC is very similar to how you accessed your SA302s.
To print your Tax Year Overview:
- Sign into your HMRC Login account
- Go to 'Self Assessment'
- Scroll down the page to 'Previously filed returns'
- Click 'view your tax year overview'
- Choose the year from the 'Tax year ending' dropdown menu and click Go
- Click 'Print your tax year overview'
- Select 'Save as PDF' and click Save
