Computer says no – getting a mortgage as a GP locum

After a flood of clients taking out or renewing mortgages recently, Liz Densley explains some simple steps you can take to make sure you get the house you want.

Lenders are very much working on ‘computer says no’ basis, rather than human interaction being able to be used to make a decision.

So what is needed, what can you do, and what can you expect of your accountant?

Lenders ask for two things generally:

  • Final accounts (not draft accounts)
  • SA302s

What are ‘final’ accounts?

These are accounts prepared by a professional adviser, where both you and the adviser have signed them off as final. Do not expect your adviser to sign accounts that you yourself have not signed first.

These are going to be the accounts on which your tax return is based, so they should not include material estimates or have other unanswered questions.

Final accounts for the self-employed do not need to have a balance sheet. An income and expenditure account is normally sufficient for freelance locum work.

If you operate through a company then there will be more formal statutory accounts, with an added detailed profit and loss account – so they will take more time to complete and finalise than a simple income and expenditure account.

What are SA302s?

These are calculations that HMRC provide where you do not calculate your tax yourself on your return, or where the figures on the return are incorrect. HMRC used to happily provide copy SA302s for taxpayers who did self-assess, but they are less keen to now and it takes a fair while.

The fast alternative, which nearly all lenders accept now, is for your accountant to print off a detailed tax calculation from their own tax system showing net income and deductions, and this is supported by a tax year review which is printed off the HMRC portal by your accountant and matched back to their calculation.

Where the tax return has been submitted and processed, these can be obtained instantly. But if the return has not been completed and submitted, then you will not get one. There is no concept of an estimated SA302.

Sometimes lenders ask for projections. Most accountants are not in possession of a crystal ball and do not like providing formal projections, as we have no control over your future earnings or expenditure. The best you can hope for is a letter confirming what the bookkeeping says for the year to date, and what that would give rise to for a year if income continued at the same rate.

Our professional institutes suggest that all mortgage references are accompanied by a standard disclaimer – ours says:

Whilst we have no reason to believe that our client would enter into a commitment such as that proposed which our client did not expect to be able to fulfil, we can make no assessment of our client’s continuing income or future outgoings.

Whilst the information provided above is believed to be true it is provided without acceptance by Honey Barrett of any responsibility whatsoever, and any use you wish to make of the information is, therefore, entirely at your own risk.

Do not be offended by this, or think that the lenders will look unkindly on you because of it – they are used to the standard wording, and indeed some lenders even pre-print it on their forms for us.

What can you do?

If you keep right up to date with your bookkeeping, and pass your tax information to your accountant promptly at the year end, you can get your return submitted nice and early, so that when you need SA302s the information is all there to print off.

If you are late with your information, only providing it when you know you need it urgently for a tax return, expect to have to pay more for your tax return and your accounts, because a more expensive person is likely to have to do it to turn it around fast for you. In any event, you should expect to pay for the time involved in preparing the SA302s and/or completing the reference form for the lender.

If you know the lender is going to ask your accountant for a reference form, then tell your accountant immediately who they are going to hear from and where it is to be sent and explicitly give your accountant permission to provide that information. We often have to waste a day trying to track someone down to get their permission to provide the reference.
So to sum up – the possible need for a mortgage is yet another reason to keep your records up to date as you go through the year and to provide them to your accountant promptly after the end of the tax year.

Liz Densley is medical specialist partner with Sussex Chartered Accountants, Honey Barrett, and is secretary of AISMA (the Association of Independent Specialist Medical Accountants). Contact her at liz.densley@honeybarrett.co.uk.

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