Proof of income -Mortgage co requires documents I don't have
Discussion
I'm 95% of the way through a mortgage application having had an offer accepted on the back of an agreement in principle.
This is based on my main income and income from my current house which I rent out rooms of under the rent a room scheme.
Mortgage company is now saying they need proof of this rental income in the form of my tax return. However having raised the threshold to £7500pa I now no longer need to declare the income, so did not.
I am going to do what I can with the broker tomorrow to resolve this with the lender and underwriter, but any advice welcome. I have supplied clear bank statements showing the income, tax return trom from 2015-16 which shows it, and Tax return from 2016-17 which does not.
Currently they have max-loaned me £20,000 odd short. I might be able to obtain this shortfall as a gift from my parents but that's not really the point.
In the near future I intend (ed) to sell said curren house anyway, and use the equity to make an overpayment. However that doesn't solve today's issue.
Daniel
This is based on my main income and income from my current house which I rent out rooms of under the rent a room scheme.
Mortgage company is now saying they need proof of this rental income in the form of my tax return. However having raised the threshold to £7500pa I now no longer need to declare the income, so did not.
I am going to do what I can with the broker tomorrow to resolve this with the lender and underwriter, but any advice welcome. I have supplied clear bank statements showing the income, tax return trom from 2015-16 which shows it, and Tax return from 2016-17 which does not.
Currently they have max-loaned me £20,000 odd short. I might be able to obtain this shortfall as a gift from my parents but that's not really the point.
In the near future I intend (ed) to sell said curren house anyway, and use the equity to make an overpayment. However that doesn't solve today's issue.
Daniel
I’m not quite sure whether I have got this right but are you saying that £7500 is your only income and hence you didn’t declare this to the taxman. Or (as I think you mean) this is £7500 as well as other incomes/salary...etc. If this is rental income you need to declare it to the HMRC.
How on earth can you secure a mortgage on a new property based on income from the old one?
Edit - I see you’re planning on owning both at once - isn’t that even worse because you’ll no longer be living in the house you’re claiming tax relief on income from?!
Edit - I see you’re planning on owning both at once - isn’t that even worse because you’ll no longer be living in the house you’re claiming tax relief on income from?!
Edited by Toaster Pilot on Wednesday 7th March 02:05
Surely if you sell the current house you will no longer have the rent-a-room income?
If you keep the current house it will no longer qualify under the rent-a-room scheme so will have to be declared.
If you intend to rent-a-room in the new house maybe the mortgage company will have something to say.
Seems you may be in a no win situation! And would be best to make other provisions.
If you keep the current house it will no longer qualify under the rent-a-room scheme so will have to be declared.
If you intend to rent-a-room in the new house maybe the mortgage company will have something to say.
Seems you may be in a no win situation! And would be best to make other provisions.
DanielSan said:
Toaster Pilot said:
The “rent a room scheme” is special tax treatment for having a lodger renting a room in the house you live in.
Ahh I didn’t notice the rent a room part. In that case you make a valid point and I’ve no explanation 
This doesn’t mean he’s not going to declare it as rental income to hmrc next year and beyond, once he has moved out and Into his new Place. There may or may not be a mortgage on his old Place, probably is, hence the MoCo diving a bit deeper into his finance.
OP - the MoCo probably won’t back down. Their procedure is set and almost impossible to move most of the time. ‘Computer says no’ and all that. Borrow it from bank of Mum and dad until you’ve sold the old place I guess.
Yes.
Previously I have declared it, when the threshold was lower (4250 from memory) but not it's high enough I don't have to. In hindsight I should have declared it anyway, as it would have been tax free still, but the online form wasn't doing as expected and as required so rather than resolve that (?) as I had already work out it was under the threshold I decided not to, without any expectation of this ever being an issue.
The current rented out property will remain with me during the process of buying the new house, hence using its income to increase my affordably and offset it's financial commitment. However in due course I will be selling it as a separate transaction after completing on the new house. I've owned the current house for about 6years and always rented out rooms.
Daniel
Previously I have declared it, when the threshold was lower (4250 from memory) but not it's high enough I don't have to. In hindsight I should have declared it anyway, as it would have been tax free still, but the online form wasn't doing as expected and as required so rather than resolve that (?) as I had already work out it was under the threshold I decided not to, without any expectation of this ever being an issue.
The current rented out property will remain with me during the process of buying the new house, hence using its income to increase my affordably and offset it's financial commitment. However in due course I will be selling it as a separate transaction after completing on the new house. I've owned the current house for about 6years and always rented out rooms.
Daniel
eltax91 said:
OP - the MoCo probably won’t back down. Their procedure is set and almost impossible to move most of the time. ‘Computer says no’ and all that.
This is my fear. Such a stupid situation to be in. eltax91 said:
Borrow it from bank of Mum and dad until you’ve sold the old place I guess.
If I can extend their already generous gift, then this is certainly a fall back I may have, which others my not. It just seems utterly mad to be in this situation. We're not talking £20, it's £20k, and we're not talking un evidenced income. We're talking full copies of bank statements, income summary on a spreadsheet, tax return summary for one year, and offer of copies on the contracts which have the names and rent values to match the routinly incoming funds.Ffs.
I wouldn't even mind if we had been told this 6month ago. They also failed to say it would be taken as an average over 2years, where say my salary is just the last three month payslips. This makes little difference to me, but I've only found out at the 11th hour.
Daniel
dhutch said:
Yes.
Previously I have declared it, when the threshold was lower (4250 from memory) but not it's high enough I don't have to. In hindsight I should have declared it anyway, as it would have been tax free still, but the online form wasn't doing as expected and as required so rather than resolve that (?) as I had already work out it was under the threshold I decided not to, without any expectation of this ever being an issue.
The current rented out property will remain with me during the process of buying the new house, hence using its income to increase my affordably and offset it's financial commitment. However in due course I will be selling it as a separate transaction after completing on the new house. I've owned the current house for about 6years and always rented out rooms.
Daniel
HMRC are the ones who will tell you whether you're earning too little or too much to be taxed on it. If you don't tell them what you're taking in, regardless of whether it's under the threshold, they won't know how much money you're bringing in. You're effectively earning nothing in the eyes of HMRC because they can't see what you're taking in. And if HMRC find out you haven't declared what you're earning, you're in for a bad time.Previously I have declared it, when the threshold was lower (4250 from memory) but not it's high enough I don't have to. In hindsight I should have declared it anyway, as it would have been tax free still, but the online form wasn't doing as expected and as required so rather than resolve that (?) as I had already work out it was under the threshold I decided not to, without any expectation of this ever being an issue.
The current rented out property will remain with me during the process of buying the new house, hence using its income to increase my affordably and offset it's financial commitment. However in due course I will be selling it as a separate transaction after completing on the new house. I've owned the current house for about 6years and always rented out rooms.
Daniel
Speak to a tax professional pronto.
The way HMRC records (or doesn't record) income from individuals these days is having a dramatic effect on being able to provide evidence of income.
HMRC no longer issues any proof of what has been declared for tax purposes either. The SA302 has been abolished and the old style Income Tax assessment was abolished 22 years ago.
HMRC no longer issues any proof of what has been declared for tax purposes either. The SA302 has been abolished and the old style Income Tax assessment was abolished 22 years ago.
For those telling the OP he should’ve declared - is it even possible to declare “rent a room scheme” income? All of the guidance notes from HMRC seem to point to that you either don’t declare it because you don’t need to or you do because you want to treat it like normal income to offset losses and such
dhutch said:
eltax91 said:
OP - the MoCo probably won’t back down. Their procedure is set and almost impossible to move most of the time. ‘Computer says no’ and all that.
This is my fear. Such a stupid situation to be in. eltax91 said:
Borrow it from bank of Mum and dad until you’ve sold the old place I guess.
If I can extend their already generous gift, then this is certainly a fall back I may have, which others my not. It just seems utterly mad to be in this situation. We're not talking £20, it's £20k, and we're not talking un evidenced income. We're talking full copies of bank statements, income summary on a spreadsheet, tax return summary for one year, and offer of copies on the contracts which have the names and rent values to match the routinly incoming funds.Ffs.
I wouldn't even mind if we had been told this 6month ago. They also failed to say it would be taken as an average over 2years, where say my salary is just the last three month payslips. This makes little difference to me, but I've only found out at the 11th hour.
Daniel
Hope it's not me!!
On serious note, you may have "evidenced" the income but you haven't evidenced in way that is satisfactory to the lender.
The conversation with your broker should have went;
You: I want to use the additional income I receive from renting a room
Broker: Ok, let me ask the lender what they will want to see to evidence that
Broker: I've spoken to the lender and they will want the last two years HMRC evidence, of which they will average the last two years, can you provide that?
You: No.
Broker: Ok, we need to speak to other lenders then, to get the lending to where you need it or you need to increase your deposit accordingly.
Good luck!
GT03ROB said:
When did this happen Eric??
September 2017.http://www.uhy-uk.com/resources-publications/tax-h...
GT03ROB said:
When did this happen Eric??
It's been phased out by HMRC over the past 2-3 years..........it's been replaced by the Tax Calculation form that you can retrieve from the HMRC portal if you submit your own tax returns, if you have an Accountant you submits them via third party software then your Accountant can provide them for you.You will also need the accompanying Tax Overview Form for each year, which you can get from the HMRC portal even if your Accountant submits your returns.
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