Why are Mortgage Lenders so in love with the SA302?
Since the start of 2012, our self-employed applicants are being asked for SA302’s by nearly all Mortgage Lenders. This can be a tricky one as these elusive pieces of HMRC paperwork are only supplied by the Tax Office if you ask them to calculate your tax payment. Most of our clients calculate their own tax payment or pay a Professional such as an Accountant to do it for them. Therefore, they not only do not hold SA302’s, in most cases they have never received one, or even heard of them.
So what is an SA302?
Google will tell you it is a part of a Ricoh photocopier, a porcine antibody, and a thirty inch convection wall oven – no mention of HMRC.
You can get smart and try a search on the HMRC website home page.
There are no results for SA302
Further fishing in the HMRC Self-Assessment section will give you the revelation …
Receiving your tax calculation
You’ll only get a tax calculation (form SA302) if:
you sent in or made an amendment to a paper tax return and asked HMRC to work out your tax
you sent in a tax return but HMRC doesn’t agree with your tax calculation
But my Lender tells me I need an SA302 to get my Mortgage – how can I get one?
Don’t try to find your SA302 online for download. You might find your tax calculation, but that is not your SA302, it doesn’t even say SA302 on it (but neither does an SA302, so let’s not go there).
You could ask your Lender, Mortgage Broker, Accountant, and Granny where to get your SA302 and get four different answers.
Getting a mortgage as a self employed person
If you are looking for information on SA302s the chances are it is in connection with a current mortgage or remortgage application. In recent years mortgage lenders have started requesting SA302′s as part of their underwriting process for self employed applicants – this is now common across the market.
Why can’t Lender’s just work with a reference from an accountant or prepared accounts?
That would seem to be the simple answer, but in today’s market simple does not seem to work; we even had one mainstream Lender refusing to issue an offer without an SA302 even though the clients accountant could confirm his income, the business where he was a partner could confirm income, and his bank statements showed a regular five figure monthly payment from the business.
SA302′s are effectively confirmation from the Inland Revenue of their understanding of the income being received by the tax payer. This makes them a solid indicator for the lender of the affordability of a mortgage offered to a self employed borrower.
Of course SA302′s do not tell the full story in all circumstances. For example limited company directors may retain profit within the business would be considered by some lenders but will not form part of the self assessment tax calculation.
Typical issues for the self employed borrower
Other problems can be caused for the self employed borrower by:-
- Limited track record in business
- ‘A’ and ‘B’ share structure
- Rapid business growth
- Muliple businesses
- Change of trading style
All of these issues, and many others, can be overcome by our experienced self employed mortgage specialists. So if you are unsure how to progress your mortgage application call us now on 020 8979 9684.
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