If you work for yourself rather than an employer, you’ll usually be asked to provide evidence of your earnings for the last two to three years when you submit a mortgage or remortgage application, although some lenders will accept one year’s records.
Typically lenders will want to see this in the form of accounts, prepared by a certified or chartered accountant, or through your self-assessment tax calculations (SA302 forms) which you can access on the HMRC website.
Lenders typically require your most recent year-end documentation to be no older 18 months before the date of your mortgage application. This means that if you’re about to apply for a mortgage, figures for 2021/22 can no longer be accepted as the latest year’s figures and you’ll need to provide paperwork for the 2022/23 tax year instead.
Halifax and Santander, for example, have both confirmed that from now on they will need to see accounts for the 2022/23 tax year when a mortgage application is submitted.
Remember that as well as your latest set of accounts, lenders will also want to look at your outgoings to check that your mortgage payments will be affordable. They will therefore usually want to see three to six months of bank statements showing how much you pay for household bills, childcare and any credit card or loan repayments.
Lenders becoming more flexibleThe good news is that some lenders have recently improved their offerings for self-employed borrowers, who often find getting a mortgage more challenging than those who are employed and have a steadier income.
Many lenders became more cautious about who they offered mortgages to during the pandemic, with several withdrawing higher loan to value deals for the self-employed.
However, Nationwide Building Society has now reintroduced higher loan to value deals for self-employed workers with smaller deposits, and increased the amount they can potentially borrow, by allowing them to borrow up to 5.5 times their income.
Nottingham Building Society has also adopted a more flexible approach towards self-employed buyers, reducing the number of years’ worth of accounts required to support a mortgage application from three to two. Similarly, Virgin Money and Clydesdale Bank have streamlined their requirements for self-employed mortgage applicants. The banks now require just the latest month’s bank statements from self-employed workers rather than the usual three or six.