If you are thinking of applying for a mortgage in the future and will need to provide evidence of your income - read on!
HMRC announced earlier this year that from 4 September 2017 they will stop issuing paper copies of clients’ tax calculations and tax year overviews for mortgage applications, insisting that they have come to an agreement with the Council of Mortgage Lenders (now UK Finance) for them to accept online print outs.
Once upon a time, HMRC issued annual assessments which made it easy to provide evidence of a person’s income to prospective mortgage lenders. Since they introduced Self Assessment, the statement ‘SA302’ issued by HMRC setting out a person’s income and tax for each year has been the default standard evidence of income for some 20 years, particularly for the self-employed and members of partnerships.
It has become more and more complicated to obtain SA302s and the whole procedure has been fraught with difficulty. At one stage, HMRC would fax them but then many mortgage companies would not accept the faxed copies. HMRC then announced that where individuals used an accountant or agent, by agreement with UK Finance, mortgage companies would accept the tax statement produced by the agent, together with a print-out from HMRC’s agent online service which showed the same tax due for the year (but not the income). However, in our experience this has been unsatisfactory as many mortgage brokers and lenders would not accept them or were unaware of the procedure and thus they required more irritating phone calls to HMRC. Clearly HMRC no longer have the staff levels or inclination to continue providing this service and appear to make it as difficult as possible to obtain the critical SA302s.
HMRC have repeated that members of UK Finance will accept self-served copies of the tax calculation from the agent HMRC online account and the commercial software used to file the Self Assessment return and that the majority of lenders have now agreed to do so.
HMRC have been moving towards ‘digital tax’, one step of which is reliance on ‘Personal Tax Accounts’ (PTA) for each individual. Many routine matters can now be dealt with only through PTAs. In the future, anyone other than an employee applying for a mortgage will need to either ensure their prospective lender is happy with the new procedure, or go through the process to open a PTA and start gathering together the required evidence.
To check if your prospective lender is on the list of those who have accepted the HMRC proposal please follow this link https://www.gov.uk/government/publications/mortgage-providers-and-lenders-who-accept-a-sa302-tax-calculation-or-tax-year-overview
What does this mean for you?
If you are thinking of applying for a mortgage in the coming months, and are unsure whether your prospective lender will accept the procedure outlined above, we would advise you to set up your own HMRC Personal Tax Account (if you don't already have one) so that you can provide at least the Tax Overview from your own online account. If we have filed the return for you through our own software, you will already have had the detailed calculations from us and you can then provide these together with the online Tax Overview.
To set up your Personal Tax Account from scratch can take a few weeks (passwords are sent out by post) so think about doing this in advance. The link for setting up is here https://www.gov.uk/personal-tax-account