TAX BASICS

What is the purpose of SA302 and how to get one?

You’ll need to fill out a SA302 tax calculation form, which HMRC will use to verify your earnings over the previous four years. Many lenders will use this form to determine whether or not your income is accurate and whether or not the mortgage product is reasonable based on your self-assessment tax return that you have filed.

These self-assessments must be precise because the SA302 for some lenders will indicate how much you can borrow. Also, how much you can afford in monthly payments based on the information provided.

Even though it is now officially known as a Tax calculation form. Many lenders still refer it as SA302.

What is an SA302 form?

The SA302 form is an official tax calculation from the HMRC. The Self Assessment tax return for the preceding financial year (April 6th to April 5th) is used to generate this statement. Which is extremely crucial when applying for a self employed mortgage because it serves as proof of your earning capacity. The form details your earnings for the year as well as the amount of tax you owe. Since the form is effectively a certificate that verifies the amount of income you have declared. It is a simple way for a lender to confirm that the income reported on a mortgage application is the same as the income reported to HMRC.

How to get your SA302

  1. Log-in to your HMRC account.
  2. Go to the self-assessment section.
  3. Go to more self-assessment details
  4. Select the get your SA302 tax calculation option
  5. Alternatively, you can opt to print the entire calculation, select the year, and view it.

Do I need one for my mortgage?

The answer is usually yes if you are a self-employed. Your lender will require some method of validating your income, and SA302s are the most straightforward and thorough option available.

Some lenders will accept certified accounts as well. But if you already have an account, there’s a good chance they’ll send you a SA302 form regardless.

If you are subject to a Self Assessment, you will be required to produce documentation of your earnings when applying for a mortgage, as providers and lenders will submit a SA302 request to verify your earnings. SA302s were previously sent in the same manner as paper receipts; however, it is now the taxpayer’s responsibility to get the information and deliver it to lenders. The problem is that not all lenders will accept a printed version of the application.

HMRC has compiled an extensive list of mortgage providers and lenders who will accept tax summaries produced from accountancy software or the HMRC’s internet portal.  If you find yourself in this situation, lenders will also require a copy of your Tax Year Overview. Before submitting your tax calculations, it’s a good idea to double-check with your mortgage lender what additional documentation they require.

Being a self-employed means that you will have to face credit restrictions from a variety of sources and not just mortgage lenders. You would need your SA302 in order to apply for a company or personal loan. As most lenders will use it to verify the income figures on your application. They want this information in order to determine whether or not you will be able to afford the monthly loan repayments. For example, NatWest will seek two years’ worth of self-employment SA302 tax returns in order to evaluate the continuous operation of your enterprise.

Do mortgage companies check your details with HMRC?

They have the ability to do so. Lenders are increasingly relying on the HMRC Mortgage Verification Scheme, which is becoming increasingly popular. To combat mortgage fraud, the system allows lenders to contact HMRC and verify that the numbers on your application match those on their records.

The amount of money you can borrow with a self-employed mortgage is entirely up to you; there are no hard and fast restrictions. On the basis of your income or net profit. Lenders will make a determination as to how much they believe you can borrow. Some lenders may determine the amount of money they can offer you based on your stated income from the most recent tax year. While others will base their judgement on your financial statements – often two years’ worth of financial statements.

What info does my SA302 show?

Your tax calculation essentially gives the following information: a breakdown of all taxable revenue streams, as well as your tax liability and the overall amount of tax payable to HMRC. This is important to brokers and lenders and they are very keen on this information.

An SA302 form serves as a certificate for the amount of income that has been declared on your tax return. Its used along with another document known as a Tax Year Overview. This document validates that the information presented in the SA302 is correct.  The Tax Year Overview offers a summary of your tax liability for the tax year, as well as the amount of tax paid and any amounts still owing.

If you make money outside of PAYE. Your SA302 will show the amount of taxable income that you have accrued during the year. Lenders have traditionally used SA302s when processing mortgage and loan applications.

The form is divided into two sections: the Tax Calculation section and the Tax Overview section.

Tax calculation – It is a summary of your Self Assessment that shows your overall earnings as well as the amount of tax you have paid. 

Tax Overview- A summary of the current status of your tax payments is provided in the Tax Overview.

When applying for a mortgage, the Tax Calculation is the most significant portion to submit, although certain lenders may also want the Overview.

Sidharth Bharthan Menon
CEO, taxtotal​