Being self-employed has its benefits. You’re your own boss, so you can determine your own working schedule, choose your own clients and enjoy all the profits alone. However, because you don’t have a regular ‘wage’, there are times that you have to prove your income. But how do you go about doing this? We are here to help with our handy article on how to prove your income when you’re self-employed.
What is proof of income?
Proof of income is exactly what it says on the tin. It is the documentation that self-employed people use to verify their income during a given period. It is generally used to make sure that you earn a steady income, so that when you come to apply for certain products, it is clear that you can afford the repayments.
When would you need to prove your income?
There are various different instances when you may be required to prove your income as a self-employed person. For example, you will need to prove your income when filing your tax return, when applying for a mortgage, applying for loans or credit cards, and when purchasing insurance such as health and income protection insurance.
You may need to show this evidence to prove that you will be able to afford repayments, or in the event of income protection insurance, to be able to determine how much you will receive in a monthly pay out.
What can be used to prove your income?
There are a number of different documents that you can use to prove your income:
How to stay on top of your proof of income
It is important to make sure that you are prepared to hand over a proof of income document when necessary. Now that you know what documents you can use as evidence, here are some handy tips on how to stay up-to-date with your proof of income documentation.
Keep accurate and up-to-date records
Keep a record of every transaction you make in your business. Make sure to keep all of your receipts and make copies of bank statements, cheque book stubs, sales invoices, till rolls and bank slips, so that you are confident that you can hand over as much accurate information as possible.
Ensure to keep copies of you tax returns
If you're self-employed, it is required by HMRC to keep your records for a minimum of five years, in case they need to check them to make sure you’re paying the right amount of tax.
Hire an accountant
If you find it difficult to generate and keep the correct records, it might be worth hiring an accountant to do this for you. If you have an accountant, they may also be able to write a letter that proves your income as well, which could be useful if your tax return doesn’t show the extent of your earnings.
Do you need proof of income to purchase income protection insurance through Wiltshire Friendly
Wiltshire Friendly is a specialist income protection provider. We provide income replacement cover to individuals, employers and amateur, semi-professional and professional sports players who have lost their income due to illness or injury preventing them from working. In order to apply for and subsequently make a claim, you may have to prove your income, so that we know how much your monthly payouts should be.
To make a claim, apply for increased cover or discuss your individual requirements with us and discover how we can help you, please contact us today.