A mortgage that reflects the way you earn.

Why contractor income needs the right lender

“Contractor” is not one type of employment. You might work through your own limited company, an umbrella company, an agency or directly for the organisation named in your contract.

Lenders take different approaches to this income. One may use your day rate, another may assess your payslips, while another could treat you as self-employed and use your accounts or tax calculations.

They may also consider:

• Your current day or hourly rate

• How long you have been contracting

• The time remaining on your contract

• Previous contracts and any gaps between them

• Your experience in the same profession

• Whether you work through a limited company or umbrella

• Your shareholding and any significant business expenses

• Whether you are working inside or outside the off-payroll rules

We’ll identify lenders whose criteria fit the way you work and confirm the evidence required before an application is submitted.

Day-rate contractors

Some lenders can assess your income using the annualised value of your current contract rather than relying only on salary, dividends or tax returns.

The precise calculation varies, but a lender may multiply your day rate by the number of days worked each week and an assumed number of working weeks:

For example:

£400 a day × 5 days × 46 weeks = £92,000 assessable annual income

This is an income figure used for affordability, it is not the amount you can automatically borrow. The eventual mortgage will still depend on the lender’s criteria, your deposit, commitments, credit history and the property.

The number of weeks used and the required contracting history vary between lenders. We’ll compare the available assessment methods and recommend a suitable, sustainable option.

CIS contractors

Construction Industry Scheme income is treated very differently between lenders.

Some lenders can assess a CIS subcontractor using their gross CIS income, supported by recent payslips or payment statements and corresponding bank statements. Others will treat the applicant as self-employed and request two years of accounts, SA302s or tax-year overviews.

Choosing the wrong lender could mean your income is assessed less favourably or that you are asked for documents you were not expecting.

We will check:

• How long you have worked under CIS
• Whether you are paid weekly, fortnightly or monthly
• Your gross income before CIS deductions
• The consistency of the payments received
• Whether you also operate through a limited company
• Which evidence is available to support the application

We can then approach a lender that understands your income and accepts the documents you can provide.

NHS training contracts

A fixed-term NHS training contract does not automatically mean you must wait years before applying for a mortgage.

Some lenders treat trainee and junior NHS professionals as permanent employees, despite the time-limited wording of their current placement. This can include foundation doctors, specialty registrars, trainee nurses and other recognised training roles.

Other lenders apply their normal fixed-term contract rules, making the choice of lender particularly important.

We will look at your appointment, current income, stage of training and likely career progression before identifying suitable options. NHS bank work and locum income can also be considered, although lenders may require a longer earnings history for these additional income types.

Limited-company and umbrella contractors

If you contract through your own limited company, some lenders will assess the salary and dividends shown on your tax documents. Others may be able to use the current contract value instead.

Your shareholding matters. A lender may adjust the usable contract income if other people own part of the company, and it may also take account of significant business expenses.

If you are paid through an umbrella company, lenders will usually want to see the contract and recent payslips. Some also require a minimum history of contracting or working through the umbrella.

Being inside IR35 does not automatically prevent you from getting a mortgage. It changes how you are paid and can affect which evidence a lender requires, so it needs to be considered before selecting the lender.

New to contracting?

Starting your first contract does not necessarily rule you out.

Some lenders want an established contracting history, while others will consider your previous experience in the same profession, the length of the new contract and how much time remains.

Moving directly from permanent employment into a contract role within the same industry can be viewed differently from starting an entirely new career.

Speak to us before assuming that you need one or two years of accounts. Depending on your contract and professional background, other options may already be available.

What documents might you need?

Requirements vary, but it helps to have the following ready:

• Your current contract and any recent previous contracts
• Recent personal bank statements
• Business bank statements, where applicable
• Umbrella-company or agency payslips
• CIS payslips, vouchers or payment statements
• Your latest accounts, SA302s and tax-year overviews
• Evidence of relevant professional experience if you are new to contracting
• Proof of your deposit and its source
• Photo identification and proof of address

We will tell you exactly what is required before submitting the application.

Your contract does not fit one of these categories?

That is not a problem.

We also work with fixed-term employees, agency workers, freelancers, IT and engineering contractors, locums, consultants and people with income from several sources.

We will read the actual contract, understand how you are paid and identify the lenders whose criteria fit your circumstances. That individual assessment is the most important part of contractor mortgage advice.

Apply online or call 01225 258900 to speak to a friendly mortgage expert.