What is meant by an SA302 in a mortgage application?

In the UK, an SA302 is a form that provides evidence of an individual’s income for a particular tax year and is the equivalent of a self-assessment form.

It is used as proof of income by lenders, mortgage providers, and other financial institutions when assessing an individual’s financial status and can have a variety of uses.

The SA302 form is issued by HM Revenue & Customs (HMRC) to taxpayers who file a Self Assessment tax return so is a legitimate document issued with the verification of the government and supported by the law. 

The form shows the amount of income earned, tax paid, and any tax owed for a specific tax year. It is also used to show any income received from self-employment or other sources.

Is an SA302 necessary?

An SA302 is necessary if you want to complete a mortgage application and you are self-employed. It is also necessary as part of the tax assessment you must do every year to declare how much tax to pay as a self-employed individual.

So, even if you aren’t applying for a mortgage, you’d still need to do one every year. Nonetheless, things like residential mortgage applications and buy to let mortgage applications will ask for one anyway.

You could also use an SA302 if you are applying for any type of loan including a business loan which will help the productivity of your business.

So, it is fair to say that an SA302 is absolutely necessary although you don’t have to complete the process yourself, you could hand over the work to a solicitor or an accountant. Find out more about this here.

What is included in an SA302?

In an SA302, there are multiple pieces of information you must obtain to include in the document.

First of all, your tax calculation provides a detailed breakdown of all sources of taxable income, along with your tax liability and the total amount payable to HMRC. 

This information is of relevance to brokers and lenders. The SA302 form serves as a certificate of declared income and is complemented by the Tax Year Overview document, which validates the accuracy of the SA302 information by presenting a statement of your tax bill for the tax year, including any outstanding tax amount. If you have earned income outside of PAYE, your SA302 will specifically indicate the taxable income you have received. In the past, lenders have commonly used SA302s to process mortgage and loan applications.

Why do I need an SA302?

When applying for a mortgage, lenders will request an SA302 form as proof of earnings if you are subject to Self Assessment. While these forms were previously sent out as paper receipts, taxpayers are now responsible for obtaining and presenting the information to lenders.

They need this information to make sure you’re able to afford to pay off the mortgage amongst the other expenses you’d have such as section 24 payments much like how they’d assess if you’d need a mortgage guarantor.

However, not all lenders accept printed versions of the SA302 in which case you’d need to find a lender that only accepts online versions of the form. You can find this list from the HMRC here.

Some lender, in addition to submitting an SA302, will require you to have a tax year overview form alongside your application. While you still need to submit your payslips, it gives lenders more confidence in your mortgage application.

In fact, when it comes to mortgages, everyone, no matter how good their credit score is, could be asked for a tax year overview alongside their self assessment form.

Another reason why you may need an SA302 aside form mortgages is if you’re applying for a business or personal loan, nonetheless, be careful when doing this as it could impact your ability to apply for a mortgage anyway.

Lenders often request the SA302 to confirm the income figure on the loan application and ensure that the borrower can afford monthly repayments. For instance, the bank NatWest requires two years of self-employment SA302 tax returns to assess the ongoing performance of the borrower’s business.

And even if you’re not going for a full mortgage application, some lenders will refuse to show your affordability in a mortgage capacity report or refuse to give you a mortgage in principle if you don’t have an SA302.

How to complete an SA302 form

In order to complete an SA302 form, the first thing you need to do is make sure you have all the documents necessary to complete your application.

Gather together things like tax information

There are a series of deadlines you need to follow when completing a self-assessment. first of all, registering for self-assessment must be done by the 5th of October every year.

After this, you should submit your tax return by the end of October if you were doing it physically using a letter hand by the end of January if you are using an online service such as the one provided here.

 ear you should also pay the tax that you owe the government by the end of January to at the same time. 

What happens if you don’t submit an SA302 on time?

If you fail to do things on time, you can be charged a fee or you could face tax arrears which will have to be paid back in interest over the years.

What this fee is and how much interest you would be charged after the deadline if the government catches you varies case by case. 

How to write an SA302 for a mortgage application

Writing an SA302 for a mortgage application works in the same way as if you would do it for submitting your tax return at the end of the tax year.

The difference is a lender may ask for additional information on top of your SA302 including a tax overview which is a document that is automatically processed after you have completed your self-assessment.

Where can an SA302 be found in the HMRC?

You can obtain one after submitting a self-assessment tax return. then you will receive an email back in 72 hours in which you can then print out your form.

There are multiple ways to obtain an SA302 including through HMRC’s online portal or a third party or even by giving the HMRC phone call. It is also possible to ask a mortgage broker or solicitor to set this up for you if they have the right information. 

To begin this process, you can obtain an SA302 form from HMRC by logging into your online HMRC account, or by calling HMRC and requesting a copy to be sent to you. 

Then, some lenders and financial institutions may also be able to access your SA302 form electronically with your permission so you don’t need to send anything over. 

SA302 Self Assessment and the Tax Overview

There is an additional document to the SA302 called a tax year overview, this is to verify that the information given in the SA302 is correct. this document is automatically processed after a customer has filled in their SA302.

It shows the amount of tax owed throughout the tax year by the customer who submits that form.

In order to access it, you will have to scroll down on the government website after you have logged in to the self assessment section.

Next, find the section for the correct tax year, press “go” and then print out your form using the print your tax year overview icon.

How to calculate tax for the tax year ending on April 5th

You do not need to calculate your own tax for the tax year as this is automatically done if you fill out the SA302. As long as you have your 10-digit unique taxpayer reference, your National Insurance number and the details of the income you made throughout the tax year.

The rest of the calculations start to become pretty straightforward.

So, be sure to pay attention to the records of expenses and dividend payments related to the business and and contributions to charity or pensions which can impact the amount of tax you pay.

Finally, you may also need to submit a P60 which will help you accurately complete an SA302. This will give the government a good idea of the income you have already pay tax on. 

Do lenders accept tax overviews?

Lenders sometimes accept tax overview and there is a list of what type of lenders accept this on the government website you can find here. Sometimes, they will require a tax overview as well as an SA302, others just need the overview.

It is important to note that if you have a tax overview you would have submitted a self-assessment anyway because this document is processed afterwards. 

What do lenders actually want? 

Whenever you file a self-assessment tax return, lenders typically look at the profit you make and will require evidence of this. In the form, they will look for the income you are currently making alongside evidence it will continue.

This could include submitting evidence that you have clients lined up for the long term or a consistent supply or business. In general, this strictly depends on the type of income you make through being self-employment   

What happens if you’re employed at your own company?

If you are employed at your own company, the process is slightly different because you have to submit evidence that your business will continue into the future and also pay yourself a salary.

You could use the business bank statements and evidence of consistent income to help justify any reduction in salary and use the two alongside each other to make a strong case. 

To conclude

There is a lot that goes on in the process of filling out and filling the document in the right way is essential to make sure you get approved for a mortgage whether that be remortgaging or applying for a 5% deposit mortgage.

There are also some other reasons to apply for an SA302 too such as the need to fill out an application for a business loan or completing the general tax return process at the end f a tax year.

All in all, if you’re self-employed, stay informed on this topic and keep on top of any ways you can save money or prove to lenders that you’re able to borrow money. It is an important thing to do as earning an income yourself is seen as riskier to begin with.