With ever increasing levels of debt and concerns during the recession, mortgage lenders have been clamping down on their requirements for proof of income.  Historically they have asked for accountants references, but more recently for SA302s which are a tax computation from HMRC showing the taxable income and the tax due to be paid.  These are available online for people who prepare their tax return using the HMRC online facility however people with more involved tax affairs using accountants cannot access these statements.  To avoid too many people calling HMRC requesting a paper copy, they agreed in April 2015 with the mortgage lenders that the lenders would accept in place of an SA302 the following documents:

  • A Tax Year Overview which is readily available by accountants using their agent access to client records
  • A tax computation for the relevant year, this will show the tax due agreeing to the Overview

This seems like a common sense solution which you would expect the mortgage lenders to use, but it seems that they are ignoring this agreed statement and still asking for the SA302s.  The full text of the press release follows:

Mortgage lenders require external evidence of earnings to support mortgage or loan applications. Until now customers with self-employed income were asked to provide a paper copy of the Tax Calculation (known as the SA302) from HMRC for this purpose.

We have been working with the Council of Mortgage Lenders on improving some Self Assessment (SA) online documentation, so that it can be considered as evidence of income declared to HMRC and to meet the Financial Conduct Authority (FCA) challenge over the robustness of the Tax Calculation.

The online documents that have been improved are:

  • The ‘Tax Calculation’ which shows the breakdown of the income returned on the customer’s tax return, including commercial versions and
  • The ‘Tax Year Overview’ which confirms the tax due from the return submitted to HMRC and shows any payments made, cross referencing the Tax Calculation with HMRC records.

The new process

Lenders will ask customers to provide both these documents; some mortgage lenders have begun, while others are still preparing to put the new process into practice.

To avoid any unnecessary delay or confusion over what a lender needs we strongly recommend you (your client) confirms with the lender what is acceptable before obtaining any documents or submitting any information. In many cases this will mean you (your client) can print the documents without having to contact HMRC to get paper copies.

In order to access and print what you need, you or your client need to be registered for HMRC online service. If you use

  • HMRC software to send your client’s return then you can print both documents from the SA online account
  • commercial software to submit the return, you can print the tax year overview from the SA online account but you need to use your own software to print the Tax Calculation.

HMRC will continue to provide paper copies for anyone who cannot access and print their documentation or if the lender requires paper copies then contact HMRC Self Assessment Helpline.

Hopefully common sense will prevail and avoid the need to call HMRC but our current experience is that lenders continue to ask for SA302s. If you would like advice or assistance in this or other areas feel free to call. Alastair Wood, AW Accounting, Gravesend, Kent – Accountants who “speak your language”