Self-employed mortgages, properly understood.
Every lender assesses self-employed income differently. We know which lenders will look at the complete picture and what evidence they need, so your application reflects how your business actually performs.
- Options available with just one year’s accounts
- Company profit may be considered alongside salary and dividends
- Advice for sole traders, partnerships and limited-company directors
Why self-employed mortgages are assessed differently
For an employed applicant, the starting point is usually clear: their salary.
For someone who is self-employed, several figures could be relevant- net profit, salary, dividends, company profit or a share of partnership income. Different lenders use different combinations, so the lender you approach can materially affect the income used in the affordability calculation.
Tax-efficient business planning can also mean that the money you draw personally does not reflect the full performance of the business. The key is finding a lender whose assessment suits your business structure.
Which income figure will a lender use?
Sole traders and partnerships
Lenders generally use your net profit- or your share of the partnership’s net profit- as shown on your tax calculations.
Most ask for the latest two years and use either an average or the latest figure, depending on the trend. If profits have fallen, the lender will normally use the lower recent figure and may ask why.
Limited-company directors
Many lenders use your salary plus dividends. This can work perfectly well if you draw most of the available profit from the company.
Other lenders can use your salary plus your share of the company’s net profit after Corporation Tax. This may produce a more representative assessment if you retain profit within the business rather than withdrawing it all as dividends.
Shareholding, business performance and the lender’s exact definition of profit will all matter.
Contractors
Contractors may be better assessed using the value of their current contract or day rate instead of their accounts. This depends on the lender, contract history and how the contractor is paid.
See our contractor mortgage page.
An example of why the lender matters
Imagine a director who owns 100% of their company and receives:
- £12,570 in salary
- £30,000 in dividends
- £90,000 as their share of company net profit after Corporation Tax, of which £60,000 remains in the business after the dividend is paid
A salary-and-dividends lender may assess income at £42,570.
A lender using salary plus the director’s share of company net profit may assess it at £102,570.
Using a simple income multiple of 4.5 for illustration, those figures would be approximately £192,000 and £462,000 respectively.
That is not a borrowing guarantee. The eventual mortgage amount will also depend on expenditure, credit commitments, deposit, mortgage term, credit history and the lender’s affordability calculation. It does show why approaching the right lender can make such a significant difference.
How long do I need to have been trading?
Two complete years of trading history will give you access to the widest range of lenders, but it is not an absolute requirement.
- One year: Some lenders will consider one full year of finalised accounts, particularly where you previously worked in the same profession or took over an established business.
- Less than one year: Options are limited, but your previous employment, current contract and experience in the same industry may provide another route.
- Two years or more: This meets the standard requirement for many lenders. They will consider whether income is stable, increasing or falling.
- Longer trading history: A lender may request a third year or additional information if the latest figures vary significantly.
Do not assume you must wait another year without checking. We can assess the available figures and tell you whether suitable options already exist.
Planning to apply within the next 18 months?
Speak to us and your accountant before finalising your next set of accounts or deciding how to draw money from the business.
This is not about artificially increasing your income. It is about understanding how legitimate decisions around salary, dividends and retained profit may affect both your tax position and your mortgage options.
Taking a larger dividend purely to satisfy one lender could create an unnecessary tax bill if another suitable lender can assess your share of company profit instead.
We provide mortgage advice rather than tax advice, so your accountant should advise on the tax implications while we explain how different lenders are likely to assess the figures.
Self-employed income made clearer
Whether you’re a sole trader or company director, with one year’s accounts or several, we’ll explain how lenders may assess your income and compare suitable mortgage options. Your first conversation is free, with no pressure to proceed.
Call 01225 258900Questions
Your Self Employed questions, answered.
Can I get a mortgage with one year's accounts?
Yes, with the right lender. A reasonable number will consider a single full year of accounts, particularly where you were previously employed doing similar work. It is not the whole market, but it is far from impossible.
Do lenders use my salary and dividends or my company profit?
It depends entirely on the lender. Most use salary plus dividends. A minority will use salary plus your share of retained net profit, which can be transformative if you leave money in the business for tax reasons. This single decision often changes borrowing by six figures.
My latest year is my best year. Will lenders use it?
Some will use the most recent year's figure. Others average the last two, and a few average three. If your profits are climbing, the choice of lender matters a great deal.
What documents will I need?
Typically two years of finalised accounts or SA302s with tax year overviews, three months of business and personal bank statements, and your accountant's details. Company directors should expect to provide full accounts rather than the abbreviated version filed at Companies House.
Ready when you are.
Whether you’re arranging a mortgage or protecting what matters, tell us what you need and we’ll explain your options clearly. Your first conversation is free and there’s no obligation.
Your home or property may be repossessed if you do not keep up with repayments on your mortgage.
