How do you prove your income when applying for a mortgage?
Updated: Mar 2, 2021
If you’re self-employed rather than in standard full-time employment, things are a bit different when it comes to proving your income. There are a couple of golden rules. First, if you own a limited company, you need to get your income paperwork put together by an accountant – that way the lender can be fully confident that the figures you’ve put forward are accurate. Second, it’s important you understand these figures and your income history – because you’ll be asked about them by your broker.
Lenders will ask you for different information based on what type of self-employment you’re in (the exact requirements will vary from lender to lender).
If you’re a contractor or freelancer
You’ll need to supply your most recent employment contracts to show what you earn as a day rate. The lender will then average out the figures in your contracts over the course of a working year to produce an annual salary figure for you. You should also have your SA302s/tax calculations and tax year overviews to hand, as some lenders will insist on seeing them, and not having them limits your options in terms of which lenders you’ll have access to.
If you’re paid a day rate as a contractor or freelancer, this shouldn’t be a problem – you should be able to use both your SA302s/tax calculations and tax year overviews, as well as your contracts, to prove your income.
If you’re a sole trader or landlord
You’ll almost certainly need to provide your SA302s/tax calculations and tax year overviews for at least the last two years. Many lenders will accept tax calculations and tax year overviews that customers, or their accountants, have printed themselves from their HMRC online account, but double-check with the lender or your broker – paperwork delays are the biggest issue when it comes to a smooth mortgage application.
If you’re self-employed in a limited company
You’ll need to show your tax year calculations, tax year overview and the company accounts for the last two years. That way, lenders will be able to take into account both your basic salary and any dividend payments you get.