HMRC announcement spells the end of the SA302 tax calculation

22 August 2017

HMRC have announced that from 4 September 2017, they will stop issuing paper copies of clients’ tax calculations and tax year overviews for mortgage applications, insisting that they have come to an agreement with the Council of Mortgage Lenders (now UK Finance) for them to accept online print outs.

Once upon a time, HMRC issued annual assessments which made it easy to provide evidence of a person’s income to prospective mortgage lenders. Since they introduced Self Assessment, the statement ‘SA302’ issued by HMRC setting out a person’s income and tax for each year has been the default standard evidence of income for some 20 years, particularly for the self-employed and members of partnerships.

It has become more and more complicated to obtain SA302s and the whole procedure has been fraught with difficulty. At one stage, HMRC would fax them but then many mortgage companies would not accept the faxed copies. HMRC then announced that where individuals used an accountant or agent, by agreement with UK Finance, mortgage companies would accept the tax statement produced by the agent, together with a print-out from HMRC’s online service which showed the same tax due for the year (but not the income). However, in our experience this has been unsatisfactory as many mortgage brokers and lenders would not accept them or were unaware of the procedure and thus they required more irritating phone calls to HMRC. Clearly HMRC no longer have the staff levels or inclination to continue providing this service and appear to make it as difficult as possible to obtain the critical SA302s.

HMRC have been moving towards ‘digital tax’, one step of which is reliance on ‘Personal Tax Accounts’ (PTA) for each individual. Many routine matters can now be dealt with only through PTAs. This is causing accountants and agents many problems as we cannot (yet) access clients’ PTAs. Further, many clients either see no need for a PTA if they use an agent, on the principle of keeping a dog and barking themselves, or are confused by the fact that the Agent online service is different from a PTA.

HMRC have repeated that members of UK Finance will accept self-served copies of the tax calculation from the HMRC online account or the commercial software used to file the Self Assessment return and that the majority of lenders have now agreed to do so.

If a lender refuses to accept self-serve copies, HMRC suggests that ‘agents check if they are on the List of Lenders who accept them’.

In the future, anyone other than an employee applying for a mortgage will need to either persuade their prospective lender that the new procedure is acceptable, or go through the process to open a PTA.

What does this mean for you?

If you are thinking of applying for a mortgage in the coming months, and are unsure whether your prospective lender will accept the procedure outlined above, we would advise contacting HMRC now, before 4 September, for copies of your SA302s for the last three years for which you have filed tax returns.

After that date you will need to open a PTA if your lender insists on an SA302. To do so from scratch can take a few weeks (passwords are sent out by post).

If you have any questions about the SA302 and what these changes may mean for you, please contact me or your local UHY adviser. To read more of our tax blogs, click here.