Director Why The SA302 Form Is Great For Proving Income

Tony Dhanjal

SA302 Form

This Article Contains

Whether you’re applying for a loan, a mortgage or even a visa there are many situations where you may need to prove your income and you may want to consider obtaining a SA302 form For employees who are paid via PAYE this doesn’t tend to cause any issues as they can simply use payslips and the corresponding bank statements to demonstrate their level of income. Most lenders are happy with this as the payslips are from a third party, contain the details of the employee (such as name and national insurance number) and also show that tax has been paid on that income. 

But what about self employed individuals? What about those who have income from renting property? Or even those who are in employment but have other sources of income they want lenders to consider as well? In these situations It is more difficult to verify that income as a lot of it tends to be self declared and therefore more subject to manipulation. The SA302 form is HMRC’s solution to this problem. It provides taxpayers with an official document that demonstrates their income from different sources in a recognised format that is accepted by third parties. In this article we will take a closer look at the SA302 form and how to obtain it.

What Is The SA302 Form

The SA302 form is a summary of income that has been declared on your self assessment tax return. It includes income from sources such as employment, self employment, dividends and property rentals. It is useful in situations where you need to prove your income to lenders and other interested parties. The SA302 is an official form from HMRC so and contains their logo so acts as a third party verification of your income.

The SA302 is usually available for the last 4 tax years (assuming that a tax return was submitted to cover each period). The tax year runs from 6th April to 5th April of the following year.

What Does The Form Actually Show?

The SA302 is a summary of earnings and taxation so it will include details of:
 
  • Income from employments
  • Self employment profits
  • Profit from UK land & property
  • Dividends received
  • Interest from banks, building societies etc
  • Calculation of income tax liability on the above
The summary also details your name and tax reference for identification purposes.
 

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What About Capital Gains?
Capital gains are usually considered one off events and most loan and mortgage lenders would not usually consider them a reliable source of income to borrow against. This can leave those who make their money from investing in a difficult position when it comes to borrowing. 
 
For example those who make money from trading stocks or cryptocurrency could be considered too high risk. This would apply to the vast majority of people with investment income as they tend to be taxed under capital gains tax rules however there are certain situations where their activity could be considered a trade in which case the income may be considered for lending purposes. To learn more about this check out our article cryptocurrency tax uk – what you need to know.
 
The second problem with trying to use capital gains as an income source to borrow against is that some fairly considerable gains don’t always need to be disclosed to HMRC which would make them very difficult to verify. The capital gains allowance is currently £12,300 (20/21) and usually if an individual has taxable gains lower than this amount then there is actually no requirement to declare them to HMRC at all. This means you could have a fairly sizeable income but no way to verify it apart from your own records. If you want to learn more about capital gains you can with our article capital gains tax UK.
 

Is It The Same As A Tax Return?

No the two are not the same. A tax return (also known as a self assessment) is the tax payers opportunity to declare the different sources of income that they received throughout a tax year. The self assessment is usually due by 31 January following the end of the tax year and individuals can incur penalties if they miss this filing deadline as well as interest on any unpaid tax liabilities. The completion of a self assessment involves answering a number of tick box questions, inputting income details and deducting relevant allowable expenses. The SA302 then looks at the information from the self assessment and summarises the information that has been submitted but the SA302 form doesn’t show a breakdown off how the figures were calculated. Think of the SA302 as a summary of earnings.
 

Tax Year Overview v SA302

You should be careful not to confuse the tax year overview with the SA302. These are two separate documents. The tax year overview is also available for each year that a self assessment tax return has been submitted and only covers a 1 year period. 
 
The overview only shows the liability/repayment relating to that tax year along with any payments made by the individual. Because the overview displays the payment of the outstanding tax liability, third party lenders can also ask for this form to support the SA302 as it demonstrates that not only was the income declared to HMRC but the resulting tax liability was paid. The tax year overview can also be printed from inside the government gateway.
 

Who Might Need An SA302 Form?

The SA302 form is useful for anyone who needs to prove their income in an officially accepted format. Although the most common seeker of the SA302 are self employed individuals it can be useful for employed individuals with additional income sources as well. Some of the most common examples of when you might need to produce an SA302 are:

  • Applying for a mortgage
  • Taking out a loan
  • Demonstrating income for a visa application
  • Applying for grants
Although these are some of the most common examples we come across, technically any third party that requires you to demonstrate your income could ask for an SA302.
 

How Can I Obtain My SA302 Form?

Previously this was done by a written or verbal request to HMRC which as we all know can be very time consuming. Thankfully the digitalisation of HMRC taxes means that if you have access to self assessment via a government gateway login then you can download and print it yourself very easily. Just follow these simple steps:

  1. Login to your government gateway account
  2. Proceed to the self assessment section
  3. Click on “more self assessment details”
  4. Select “get your SA302 tax calculation”
  5. Click “print your full calculation”
  6. Select the year you require from the tax return options menu
  7. Click “view your calculation”
  8. Click “view and print your calculation”
You will need to have a government gateway login and be registered for self assessment to access the above. If you need to register for self assessment this can be done on the HMRC website. You can also learn more about who might need to register for self assessment by reading our article self assessment do I need to register for and complete self assessment?
 
Why Aren’t Bank Statements Sufficient?
Bank statements do usually make up part of the mortgage and loan application process along with payslips where applicable but the SA302 adds a further layer of credibility as it demonstrates that the income has been declared to HMRC and tax can be confirmed as paid by viewing the tax year overview. In the eyes of the lender It wouldn’t be difficult for individuals to falsely label a bank transfer as a dividend receipt in order to boost their borrowing potential so these additional checks help to give lenders a reasonable degree of confidence in your earnings when considering applications.
 
Is This Available For Company Directors?
Yes, the SA302 is particularly useful for company directors as they are often paid via a mix of dividends and salary. Mortgage providers and banks will usually want to see a company directors SA302 to verify their income.
 
Sometimes the SA302 doesn’t tell the full story for company directors as it only display profits withdrawn from the company. It does not consider profits that have been retained within the limited company that can be withdrawn at a later date.  Company directors may want to seek out lenders who have a better understanding of their particular setup otherwise your ability to borrow can be significantly impeded.
 
Can My Accountant Retrieve This For Me?
In most cases yes. Accountants will usually have access to their clients government gateway via their agent portal and can access the SA302 form here. Some commercial accounting software has the ability to generate the SA302 on demand. Of course this could vary from accountant to accountant and will be dependent on your particular setup but if you are struggling to access the form yourself it is a good idea to speak to HMRC or an accountant.
 
 

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Practice based accountant with over 10 years experience, specialising in SME's, Freelancers and Personal Tax. "I take pride in proactively recognising tax planning opportunities on behalf of clients to help them operate more efficiently."

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