In previous articles, we’ve looked at what a mortgage lender might need from a self-employed applicant. In simple terms, the information required will be very much the same as the information requested of an employed applicant. This includes proof of income.
An employee can provide payslips and a P60 to evidence their income, whereas self-employed will not have these documents. Also their businesses may have had good and bad years and therefore erratic personal income.
For the sole trader or freelancer paying themselves outside of the PAYE system, there is now only one way that lenders will verify income:
You will need to provide the lender with proof of the income upon which you have previously paid tax to HMRC. This latter proof comes in the form of a certificate issued by HMRC, known as an SA302. They will also want to see the Tax Year Overview which accompanies it, as this will prove that the tax due has been paid.
Requesting this information early will help speed up the mortgage application, and thus the home buying process.
To apply for an SA302 simply click here. You can then print off your SA302.
For the self-employed that pay themselves through the PAYE system whether you are classified as ‘self-employed’ for the purposes of your mortgage application will depend on your individual circumstances.
If you are a relatively small Limited Company and you own all or a large majority of the shares in the business, you are likely to be considered self-employed and the lender will want to see at least 2 years worth of accounts.
If you own a smaller proportion of the business (usually less than 10%), you are one of several officers of the company and you receive most of your annual pay through the PAYE system as pay, then you might well be classified as an employee.
The most complicated scenario is when a business is relatively new and three years of previous accounts either don’t exist or they do not show profits OR when a director has taken most of their income as a dividend rather than salary or has artificially suppressed their income for the benefit of business cashflow.
To see how Mortgage Required can help you with your mortgage requirements contact us or click here to book a free call or video appointmnet.
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