Agents need to feel confident about their tenant's affordability. Learn how payroll integrations, open banking, and HMRC checks can simplify this process for letting agents.
Letting agents need to confirm that their tenants can afford the agreed rent before moving in. To do this effectively, checks must be tailored to each tenant's, or guarantor's, employment and financial background.
Conducting thorough affordability checks during referencing is essential, whether the tenant is retired, self-employed, or needs a guarantor.
This not only speeds up move-ins but also reduces the risk of rent arrears, giving landlords confidence in both tenants and the agents managing the process.
But are letting agents using the right tools for the job? Here’s a look at the most effective methods for verifying income.
- Full-time employed tenants
- Pension income tenants
- Self-employed tenants
- Tenants who need a guarantor
Full-time employed tenants
Relying on payslips can slow down the referencing process and increase the risk of fraud, as payslips can be falsified or fake documents can be given.
Instead of waiting for tenants to submit paperwork, letting agents can process a tenant’s application fast, with full confidence that the information is correct.
Payroll integrations allow agents to verify the affordability of their full-time employed tenants by only using their National Insurance number. Agents can also use integration with HMRC to confirm a tenant’s income through a trusted source.
Goodlord’s PRO referencing directly collects only the necessary data for income checks, eliminating the need for multiple documents and giving agents confidence in tenants' ability to pay rent.
Goodlord also uses open banking to securely check a tenant’s financial behaviour directly from their bank accounts for further protection.
However, payroll integrations are only applicable if a tenant is employed on a PAYE basis and has been with the same employer for three or more months.
Download your fact sheet to hmrc and payroll integrations
Pension income tenants
For tenants who rely on pension income, letting agents can use open banking as an alternative to payroll integration to verify affordability.
Open banking is a secure method which allows tenants to share financial information directly from their bank accounts, offering a snapshot of their financial behaviour.
Unlike payroll integration, which focuses on payslip data, open banking provides “read-only” access to details such as:
- Account details: the account holder’s name and balance
- The amount of money coming into an account each month: income, pension or savings
Open banking requires tenant consent and can be withdrawn at any time, making it ideal for verifying the financial stability of pension-income tenants.
💷 For more information about Open Banking, download our info sheet 💷
Self-employed tenants
Verifying income for self-employed tenants can be more complex, but it can be done securely through self-assessment tax returns and proof of submission.
Letting agents should conduct secure affordability checks by reviewing the correct documents or obtaining confirmation from a tenant’s accountant or company if they are contractors.
If an agent is conducting referencing checks through Goodlord, their tenant will need to provide a self-assessment tax return such as an SA100, SA800 or SA302, and proof of submission if they have been self-employed for six months or more.
If a tenant has been self-employed for less than six months, they will need a guarantor or upfront rent payment to pass referencing.
Tenants who need a guarantor
Some tenants, such as the self-employed, students, or first-time renters, may need a guarantor to secure their tenancy. Guarantors provide additional security, ensuring rent payments are covered if the tenant cannot pay.
It's essential to conduct thorough referencing checks for guarantors, similar to tenants. A guarantor should meet the same financial criteria as the tenant.
Goodlord's PRO conducts detailed, fast, and secure checks for guarantors to ensure they meet the key requirements, such as being UK residents with a clean credit history.
With Goodlord's PRO referencing, four key areas are verified:
- ID
- Credit history
- Income
- Residential checks
These checks are detailed, fast, and secure to give letting agents and their landlords peace of mind, knowing that even if a tenant defaults, their guarantor is financially capable of covering the rent.
