As an accountant having acted for hundreds of self-employed people and directors of limited companies we have seen how many hoops you have to jump through in order to get a mortgage. If you have obtained a mortgage when you were employed you may well have just approached your bank and then, hey presto, here you go. Well sorry, it’s not quite that simple for the self-employed, which includes directors of limited companies. Now I’m no financial adviser so I’m not recommending any particular product or method and this article should not be treated as such advice. It should however be treated as a practical guide on what you need to do to obtain a mortgage and to improve your chances or succeeding in doing so.
1 – Most lenders require 2 or even 3 years worth of accounts / tax returns – You aren’t going to be able to sort this with a couple of months trading behind you. Any lender wants to see consistency that you can repay them over a period of time. The best they have to judge the future is the past. Plan getting a mortgage well in advance so you can provide all the evidence they need to be able to trust you to pay them back.
2 – Use a broker – This may seem simple and obvious but many try and go it alone. Some lenders like the self-employed more than others and the brokers know the market well, knowing which brokers to approach and how they like things presented. Make sure you choose one who is ‘whole of market’ so they reach the full panel of lenders available and also one who knows the self-employed market. Not all are the same so shop around and ask for references. Don’t forget to check costs too.
3 – Maximise profits – Many people focus on cutting tax as they look short term. This isn’t abusing the system but knowing the rules and ensuring everything is spent and claimed for to minimise the amount of tax due. Ultimately though this may not be your best hand to play. Most of us are in business to make money and but nice things for ourselves, often a house. In order to achieve the borrowing needed you need to be making money. Think beyond the short term tax savings of buying those additional not quite so essential expenses and think about the long term affects this may have on achieving your goals. Tax is a bi-product of success after all.
4 – Keep your accounts up to date – Lenders want to see figures that are up to date. If you are always preparing your accounts and tax returns near the filing deadline and don’t have up to date figures readily to hand this will cause delays. Your figures could be as much as 10 months old (31 March year end filing in the following January) which can mean a lender wants more up to date figures. If you only prepare everything at the end of year then you may have considerable work to do to give the lender up to date figures.
5 – SA302’s and tax year overviews – Lenders will want some proof of the figures you have provided to them, even if via a broker. This can be in a couple of ways. If you have an accountant then an accountants certificate is quite normal. The accountant provides the lender with the details of your income and signs it as a true reflection of your earned income. If you don’t have an accountant (or sometimes if you do) the lender often requires sight of SA302’s and Tax Year Overviews for the years you are providing income figures for. This is an agreed method, decided by the council of mortgage lenders, of providing proof of your income, which many lenders have signed up to. You can call HMRC and request a copy of these documents but this can take up to six weeks to arrive. Therefore the suggested method is to access these via your HMRC online account. Details are below on how to do this:
How to print a Tax Calculation from your HMRC online account
1. Log into the HMRC online account (go to online.hmrc.gov.uk) – the ‘security message’ page will now be shown
2. Select ‘next’ to continue
3. Follow the link ‘Self Assessment details and options’ on the Self Assessment home page – the ‘current position’ page will now be shown
4. Follow the link ‘tax return options’
5. Choose the year from the drop down menu and select the ‘Go’ button
6. Select the ‘view return’ button
7. Follow the link ‘view your calculation’ from the left hand navigation menu.
8. Follow the link ‘view and print your calculation’ at the bottom of the page.
9. Follow the link at the bottom of the page to ‘print your full calculation’
How to print a Tax Year Overview from your HMRC online account
1. Log into the HMRC online account (go to online.hmrc.gov.uk) – the ‘security message’ page will now be shown
2. Select ‘next’ to continue
3. Select either ‘Self Assessment Account’ or ‘Self Assessment’ (the link shown will depend on what services you are registered for) – the ‘current position’ page will now be shown
4. Follow the link ‘tax years’ from the left hand navigation menu.
5. Choose the year from the drop down menu and select the ‘Go’ button
6. Follow the link ‘print your Tax Year Overview’.
Repeat steps 5 – 6 for any earlier years
Please note: You must wait 72 hours after fully submitting your return until you can print your documents.
If you are in business running a company or ready to make your move to a company and feel you would benefit from our advice and guidance then book yourself a discovery call by clicking here – https://mbsaccountants.as.me/discovery
