Introduction.
Running a business, contracting or working as a partner should not make borrowing harder. But lenders read self-employed income in very different ways.
One lender may average your last two years. Another may use only the latest. One will look at the dividends you have drawn, while another will look at the profit your company has made. The same person can be offered very different amounts depending on where the application goes.
This guide explains how lenders assess each type of self-employed income, the documents they will ask for, and how to time and present your application so your income is shown at its strongest.
We work alongside your accountant, so your figures reach lenders in the form each one prefers.
The difference in borrowing between two common ways of assessing the same company director.
01Who lenders treat as self-employed.
Lenders do not just mean sole traders. Anyone whose income depends on a business they own or control is usually assessed as self-employed.
Sole traders
You run the business in your own name and pay tax through self assessment on your net profit.
Partners and LLP members
Your income is your share of the partnership’s profit, which may differ from what you draw during the year.
Limited company directors
Most lenders treat you as self-employed if you own a significant share of the company, commonly 20% or 25% or more. Your income is usually a mix of salary and dividends.
Contractors and freelancers
Whether you work through your own company, an umbrella company or as a sole trader, some lenders will assess you on your contract and day rate rather than your accounts.
Construction workers
If you are paid under the Construction Industry Scheme, lenders may use your CIS statements, your tax returns, or both.
02How income is assessed.
Every lender has its own method. The table shows the figures most commonly used for each type of self-employed income.
| How you work | Figure most lenders use | Where it varies |
|---|---|---|
| Sole trader | Net profit from your tax calculation or accounts | Some add back one-off costs or depreciation |
| Partner or LLP member | Your share of the net profit | Drawings and capital accounts may be reviewed |
| Company director | Salary plus dividends drawn | Some use salary plus your share of net profit after corporation tax |
| Day-rate contractor | Day rate × 5 days × 46 to 48 weeks | Contract length and track record required |
| CIS contractor | Gross pay from CIS statements, or net profit | Some average several months of statements |
Which years count
Most lenders prefer two or three years of figures. They may then use:
- an average of the last two years,
- the latest year, if income is rising,
- or the lower of the two years.
Illustrative: net profit of £70,000 then £90,000, at 4.5 times income. Actual multiples depend on the lender and your circumstances.
03The same business, different results.
For company directors and contractors, the method a lender uses can matter more than the interest rate.
A company director
A director takes a salary of £12,570 and £50,000 in dividends, leaving the rest of the profit in the company. Their share of the company’s net profit after corporation tax is £90,000.
| Method | Income | At 4.5× |
|---|---|---|
| Salary and dividends | £62,570 | £281,565 |
| Salary and share of net profit | £102,570 | £461,565 |
| Difference | £180,000 |
Illustrative only. Lenders assess affordability on your full circumstances, not income alone.
A day-rate contractor
An IT contractor earns £600 a day on a twelve-month contract that has been renewed twice.
Annualised income at £600 × 5 days × 46 weeks, which some lenders use in place of accounts.
The same contractor’s company accounts may show a much lower figure once expenses, pension contributions and retained profit are taken into account.
Adviser’s note
Lenders that use net profit or day rates are not always the cheapest. We compare the full picture, so you can choose between borrowing more and paying less.
04Documents lenders ask for.
The core evidence is the same for most lenders. Having it ready before you apply saves days, sometimes weeks.
- HMRC tax calculations (often called SA302s) and tax year overviews for the last two or three years
- Full accounts prepared by a qualified accountant, for limited companies and some sole traders
- Your accountant’s contact details, as some lenders write to them directly
- Three to six months of personal bank statements
- Business bank statements, for some lenders
- Current contract and CV, for day-rate contractors
- CIS statements, for construction workers
- Proof of deposit and photo ID
Downloading from HMRC
You can download your tax calculations and tax year overviews from your HMRC online account. If your accountant files for you, they can provide them.
Qualified accountants
Many lenders will only accept accounts prepared or certified by a qualified accountant, such as a chartered or certified accountant.
Year-end dates
Company accounts often run to a different year end from the tax year. Lenders will usually want the most recent filed accounts, plus management figures if those are getting old.
Keep personal and business separate
Clear statements make income easier to evidence and give lenders fewer questions to ask.
05Timing and the tax year.
When you apply can change the income a lender sees. Filing early is one of the simplest ways to strengthen a case.
File as soon as you can
The tax year ends on 5 April and the online self assessment deadline is 31 January. If your latest year was your best, filing in the summer rather than the following January means lenders can use it months earlier.
Making Tax Digital
Making Tax Digital for Income Tax started on 6 April 2026 for sole traders and landlords with qualifying income over £50,000. It extends to those over £30,000 from April 2027 and over £20,000 from April 2028.
You now send quarterly updates to HMRC, but lenders still base decisions on your year-end figures and tax calculations.
Tax planning and borrowing
Reducing your taxable income, through large pension contributions or by leaving profit in your company, can also reduce what some lenders will offer. If you plan to buy, speak to us and your accountant before the year end.
Making Tax Digital for Income Tax began for qualifying income over £50,000.
06Common situations.
Few self-employed cases are textbook. These are the situations we are asked about most often.
One year of accounts
Some lenders will consider a single year, particularly if you were previously employed in the same field and your income has continued at a similar level.
Income fell last year
Lenders will want to understand why. A one-off fall with a clear explanation, such as a large project ending or time off, does not rule out a mortgage, though it may affect how much you can borrow.
Newly incorporated
If you moved from sole trader to limited company, some lenders will look at your trading history across both, rather than starting the clock again.
Profit left in the company
Directors who draw a modest salary and leave profit in the business are often best served by lenders that use share of net profit.
Recently started contracting
Some lenders will lend on a contract from the start if you have a track record in the same line of work. Others want a period of contracting first.
Multiple income sources
A mix of employment, self-employment, rental and investment income can be combined, though each lender treats each source differently.
07Preparing your application.
A well-prepared self-employed case looks like any other to an underwriter. This is how we get there.
Initial consultation
We understand how your business works, how you are paid and what you plan to buy.
Free · around 20 minutesSpeak to your accountant
With your permission, we confirm the figures and any points a lender might query.
We do the chasingChoose the method
We identify which assessment method gives the best outcome, and which lenders use it.
Whole of marketAgreement in principle
We obtain an agreement in principle from a lender that suits your income type.
Before you make an offerFull application
A complete pack with a clear explanation of your income, so the underwriter has no reason to pause.
Checked by us firstOffer and beyond
We manage the case to completion and review it again before your rate ends.
One point of contact08Illustrative cases.
The director with retained profits
A design agency owner drawing a low salary and modest dividends, with strong profits left in the business.
- Challenge
- High street lenders capped borrowing based on dividends drawn
- Approach
- Lenders using salary plus share of net profit, with figures confirmed by the accountant
- Outcome
- Enough borrowing to buy the family home without changing how they draw income
The consultant with one year’s accounts
A management consultant who left employment eighteen months ago, with one full year of accounts.
- Challenge
- Several lenders required two years of trading
- Approach
- Lenders accepting a single year with a track record in the same profession
- Outcome
- Purchase completed without waiting for a second year
These examples are illustrative and do not describe real clients.
09Questions and glossary.
Questions we are often asked
Do I need a bigger deposit?
Not usually. Self-employed applicants generally have access to the same products as employed applicants, provided income can be evidenced.
Will lenders accept my accountant’s projections?
Rarely on their own. Most lend on filed figures, though some will consider recent management accounts alongside them.
Does it matter how I pay myself?
It can. The split between salary, dividends and retained profit changes what some lenders will offer.
Can I remortgage while self-employed?
Yes. A product transfer with your current lender usually needs no income evidence at all.
Glossary
- SA302
- HMRC’s tax calculation, showing your taxable income for a year.
- Tax year overview
- HMRC’s summary confirming the tax due and paid.
- Net profit
- Turnover less allowable business expenses.
- Retained profit
- Profit kept in a company rather than paid out.
- Dividends
- Payments to shareholders from company profit.
- Day rate
- Your daily contract rate, used by some lenders.
- CIS
- Construction Industry Scheme.
- MTD
- Making Tax Digital for Income Tax.
Related: Self-Employed · All guides · Calculators