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Mortgage interest on SA302 when calc income

What is the income figure a mortgage company would use on a SA302 when there's mortgage interest

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My client has income from rental property. He is currently looking to apply for a mortgage. The new rules regarding mortgage interest means that his taxable profit is calculated before deducting the mortgage interest so this equates to taxable income of £60,000 on his SA302. As you know the mortgage interest is now deducted as a "tax reducer" lower down the tax computation. In his case this is £20,000.

When he applies for his mortgage I would like to know whether the underwritters would use the taxable figure of £60k on his SA302 as his income or would they take into consideration the mortgage interest amount of £20k hence calculate income for mortgage purpooses as £40k.

I have asked two mortgage advisors this question and they said it's up to the underwritters to decide....I can't believe I've not already bumped into this issue before. Has anyone else?

Replies (11)

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By Roland195
18th Oct 2021 12:52

I wouldn't be surprised to find that they use the top line figure. I would imagine that the advisors are right and that it varies between lenders though.

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Replying to Roland195:
ALISK
By atleastisoundknowledgable...
18th Oct 2021 13:05

Agree. I’d assume they just look at the tots income figure and ignore everything below that. The £20k wording probably doesn’t mean anything to them

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By SteveHa
18th Oct 2021 13:08

They don't understand what we send them anyway (and many still don't even know that they no longer want an SA302), so I wouldn't really be bothered about what they think.

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Replying to SteveHa:
RLI
By lionofludesch
18th Oct 2021 13:48

SteveHa wrote:

They don't understand what we send them anyway (and many still don't even know that they no longer want an SA302), so I wouldn't really be bothered about what they think.

Harsh.

But fair.

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Tornado
By Tornado
18th Oct 2021 13:17

Yes this is one of the glaringly obvious problems with MTD in that it is tax oriented and not accounting oriented, and for much of the time, ignores Accounting Standards that are designed to give a true and fair view of a person/entity's real income and status.

The problem is that MTD is genuinely a waste of time as it will not readily provide accurate tax liabilities until after the tax year end when all income and other information has been collated. HMRC also thinks that MTD will provide it with full details of everyone's income and allowances, but it will not be able to do this, for obvious reasons, and I think much income will not get declared because it is not on the HMRC list and therefore will never be discovered.

MTD is quite clearly a step backwards from Self Assessment.

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Replying to Tornado:
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By pauld
19th Oct 2021 15:38

Enjoyed reading the rant, but WTF has it got to do with the question?

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Replying to pauld:
RLI
By lionofludesch
19th Oct 2021 16:10

pauld wrote:

Enjoyed reading the rant, but WTF has it got to do with the question?

Nothing.

But I enjoyed it too.

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Replying to pauld:
Tornado
By Tornado
19th Oct 2021 16:33

I enjoyed it too.

With regard to the question, I don't know what will happen, but the SA302 does show the gross taxable rental income and the 20% relief so it would not be that difficult to work out the gross interest. If the SA302 has attached schedules, these will show how the Rental Income has been worked out so the information will be there for the provider.

That still does not fully answer the question, but this does enable a provider to equate the new with the old so they can use the traditional method of calculating rental income if they like.

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By ireallyshouldknowthisbut
18th Oct 2021 14:01

Yup, the banks don't have a clue. We do heaps of landlords and its definitively top line they ask for.

These are the same banks that ask me to "stamp" their references.

I mean, company seals went out in what 1989?

And yet if you don't "stamp" it, nothing happens...........so why they ask is unfathomable.

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Replying to ireallyshouldknowthisbut:
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By Hugo Fair
18th Oct 2021 17:09

"so why they ask is unfathomable"

'Cos of the same logic used by intellectually changed systems (and increasingly people) - along the unquestioning lines of 'the computer says ...'

Not dissimilar to when my elderly Saab 9000 suddenly lost all power ... in the middle of Salisbury Plain on a cold and wet night. Once it had been retrieved back to London, the fault was quickly identified as ... the 'computer' has malfunctioned and thinks there's a fault in your fuel feed system, so (although there is no such fault) the computer has shut off all power! So thoughtful of it!

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By Calculatorboy
19th Oct 2021 02:51

Yes most of us realised lenders might well take income figures before interest at basic rate due to their ignorance , but thats their problem, we are not teachers ...they ask for sa302 and thats what they get , without comment

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