Why the self-employed may need to file their tax return early if they need a mortgage or remortgage

Home » Why the self-employed may need to file their tax return early if they need a mortgage or remortgage Published: 28th September 2023 This Article was Written by: Adrian Anderson   mortgage application , self-employed , tax return

Self-employed mortgage applicants often experience a more challenging application process than employed ones. This is because lenders seek further reassurances that a self-employed person’s income is and will remain stable.

Self-employed mortgage applicants often experience a more challenging application process than employed ones. This is because lenders seek further reassurances that a self-employed person’s income is and will remain stable.

To help their assessment of an applicant’s income, most lenders ask for a self-employed person’s most recent 2-3 years’ HMRC tax calculations and tax year overviews.

From 6th October, lenders find that the HMRC tax figures they are using for people are over 18months old and their lending protocols demand more recent data.

Completing self-assessment tax returns earlier than planned

The outcome of this is that lenders may insist self-employed applicants complete their next tax return earlier than the 31 January deadline for that specific tax year. That way they can access a current picture of the applicant’s income and tax position.

People can of course complete their self-assessment return for a tax year ending 5 April any time between 6 April-31 January.

What it means this October

Given the popular take-up of 5-year fixed rates in 2018 and 2-year fixed rates in 2021, an unprecedented volume of mortgages are coming up for renewal in 2023. It has been estimated that around 700,000 customers are likely to be affected by this in the final half of 2023.

From 6 October 2023, self-employed mortgage applicants can expect lenders to request a copy of their 5 April 2023 tax calculation and 2022/23 tax year overview figures.

This means many will have to do their tax return earlier than HMRC’s 31 January 2024 deadline for the 2022/23 tax year. Applicants still have, however, until 31 January 2024 to pay the tax due.

Added caution

Be mindful that lenders are cautious and ask more questions during self-employed people’s mortgage application process. In some scenarios we’ve seen lenders ask for copies of the last 3 months’ business bank statements in addition to the documents that used to be requested pre-pandemic.

Get specialist advice and help

That’s not to say the self-employed cannot get mortgages in the current climate. There are both standard and specialist and standard lenders supporting this group of borrowers. At Anderson Harris, we’ve helped many self-employed professionals smoothy navigate this challenging mortgage application process. We can help you find the right property finance for your individual situation and circumstances.

Contact our team of specialists on tel. 020 7495 6633 or email enquiries@andersonharris.co.uk.