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Proof of income for a BTL / Commerical Mortgage

Proof of Income for a BTL / Commercial Mortgage

For any mortgage or loan application, the vast majority of lenders will require proof of your personal income in order to assess the application for a mortgage or loan. The proof of income differs if you are employed, self-employed, and/or receiving rental income from an existing property.

What is Proof of income?

Firstly, you need to determine if you are classed as employed or self-employed from the perspective of a potential lender

  • Employed – If you own less than 20% of the shares in the business you work for, you are classed as employed.
  • Self-Employed – If you are a sole trader, partner or own 20% or more of the shares in the business you work for, then you are classed as self-employed.

The ownership percentage is very important to understand because we have received a number of questions from applicants stating that their accountant has told them that they are employed by a limited company that they own, and are employed and not self-employed.

From a taxation perspective, this is correct but from a lender’s perspective, if you own more than 20% of the shares you have an element of control in the limited company and are classed for “lending purposes” as self-employed, so need to provide proof of income under the self-employed category.

If you are employed and have no existing property rental income

If you don’t own any other buy-to-let or commercial properties that you rent to tenants, and you have no other reason to complete a tax return for HMRC,  then the lender will accept:

  • Payslips – Last 3 months. Electronic copies are now accepted by most lenders
  • P60 – The latest one received. It can assist if this document can be provided, especially if you have moved jobs within the last 12 months.

Lenders can ask to verify the wages being credited to the Bank account. Lenders also can access HMRC information to confirm the year-to-date income stated on wage slips if they suspect fraudulent wage slips.

If you are employed and receive property rental income

This rental income should be declared on a tax return and as such, lenders can request in addition to payslips to receive a copy of the:

  • Last 2 years’ SA302 tax calculations and,
  • Last 2 years’ tax year overviews
  • Last 2 years’ SA100 tax returns (although only a few lenders ask for these and most lenders are satisfied with the first two points as proof of income)

If you are self-employed

For these applications both their main income and their property rental income will be declared on a tax return and as such, a lender will ask for:

  • Last 2 years’ SA302 tax calculations and,
  • Last 2 years’ tax year overviews
  • Last 2 years’ SA100 tax returns (although only a few lenders ask for these and most lenders are satisfied with the first two points as proof of income)

How do I obtain a copy of my tax return, SA302 tax calculation and tax year overview?

They can be downloaded from the HMRC website. In most cases, applicants don’t have direct access to this and their accountants act as their agents for HMRC, so speak to your accountant about these documents, or send them a link to this post.

How can Advocate Finance help you?

If you have any questions on what is needed to support your mortgage or loan application, please do not hesitate to contact us.

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David Tonks

david@advocatefinance.co.uk | 01206 544 333
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David Tonks

david@advocatefinance.co.uk | 01206 544 333