According to the Office of National Statistics, the number of self-employed Brits has reached its highest point in 40 years. Although being self-employed means that you may not earn a regular amount each month, like with mortgage applicants on a salary, plus your income can rise and fall from month to month and year on year, it is still possible for lenders to deem your income affordable for a mortgage.
Self-certification of income no longer exists. Your income from your self-employment will need to verified by using one or more of the following documents:
- Accounts completed by a qualified Accountant
- SA302 and Tax Year Overviews from HMRC for applicants using an Accountant or Self Assessment. These documents state your income before and after tax and a breakdown from income each fiscal year from different sources, i.e. any employed income, self-employed income, dividends, property/rental income, pensions etc.
There has been a change to the procedure in requesting your SA302s and Tax Year Overviews from HMRC from Monday 4th September 2017. The new procedure is to log into your HMRC online account to access your “self-serve” SA302s and Tax Year Overviews. These can be accessed using the website https://www.gov.uk/sa302-tax-calculation . Alternatively if you use an Accountant, they can request these for you on your behalf. NB: There is a list on the HMRC website of the mortgage providers and lenders who currently accept these “self-serve” documents – https://www.gov.uk/government/publications/mortgage-providers-and-lenders-who-accept-a-sa302-tax-calculation-or-tax-year-overview/mortgage-providers-and-lenders-who-accept-a-sa302-tax-calculation-or-tax-year-overview , some smaller or specialist lenders are not currently accepting them and require alternative documentation to verify self-employed income.
Although many lenders request to know information about your accounts from the last 3 years, there are mortgage products available to self-employed applicants with only 1 years’ worth of accounts (your Accountant may be asked to provide a projected income figure).
The figure that lenders usually work on for mortgage affordability is the net income figure rather than the gross figure.
Like with employed applicants, lenders may want to know details about your spending which can be verified from your bank statements.
It is also possible for self-employed applicants to be cover for Accident & Sickness Cover, Life Assurance and Income Protection insurance.
To discuss your self-employed mortgage enquiry, please feel free to contact your local Cambridge Mortgage Broker.