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
- Some lenders can consider company profit instead of relying only on salary and dividends
- Clear advice for sole traders, partners and limited-company directors
Your home may be repossessed if you do not keep up repayments on your mortgage.
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 assess a company director using salary plus dividends. This can work well if you draw most of the available profit from the business.
Other lenders may use your salary plus your share of the company’s profit. The precise calculation varies: some lenders use profit after Corporation Tax, while others apply a different definition of company profit.
Your shareholding, recent business performance and whether the income appears sustainable will all affect the assessment.
WHY THE LENDER’S CALCULATION MATTERS
Imagine a director who owns 100% of their company and receives:
• £12,570 in salary
• £30,000 in dividends
• A £90,000 share of company profit after Corporation Tax, including the dividend paid
A lender using salary plus dividends may assess the income at £42,570. A lender whose criteria allow salary plus the director’s share of company profit may assess it at £102,570.
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. Some lenders will consider one complete year of finalised accounts or tax calculations, depending on your deposit, previous work history, industry experience and whether the income appears sustainable. Having two or more years usually gives you access to a wider choice of lenders.
Do lenders use my salary and dividends or my company profit?
It depends on the lender. Many use salary plus dividends, while some may use salary plus your share of company profit. The precise profit figure and the minimum shareholding required also vary between lenders.
My latest year is my best year. Will lenders use it?
Some lenders may use the latest year, while others average the most recent two or more years. If income has increased significantly, the lender may ask for evidence that the higher figure is sustainable. If it has fallen, the latest lower figure is more likely to be used.
What documents will I need?
Depending on the lender and how you trade, you may be asked for finalised accounts, SA302 tax calculations, Tax Year Overviews, personal and business bank statements and your accountant’s details. Limited-company directors may also need to provide full company accounts.
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.
