If your income does not arrive as a steady salary, a mortgage can feel harder than it should be. Lenders are cautious about income they see as variable, but self-employment is common and most high-street and specialist lenders have ways to assess it.
This guide explains how different income types are treated, what evidence helps, and where the flexibility sits. It is general information, not financial advice, so treat it as background before you speak to an FCA-authorised broker.
How lenders define self-employed
You are usually treated as self-employed if you own more than 20 to 25 per cent of a business. That covers sole traders, partners and company directors. Each is assessed slightly differently, so it helps to know which category you fall into before you apply.
What income lenders will count
Sole traders are generally assessed on net profit. Partners are assessed on their share of the profit. Company directors are where it gets more involved, because a lender can look at salary plus dividends, and some will also consider retained profit left inside the company.
- Sole trader: net profit from your tax calculation.
- Partnership: your share of net profit.
- Director: salary plus dividends, and sometimes retained profit.
- Contractor: often the day rate annualised over a working year.
Only one year of accounts
A common worry is having only one year of trading history. Several lenders will consider a single year, especially if you worked in the same field before going self-employed and the figures are healthy. The choice narrows, but it is far from impossible, and a specialist lender or a broker who knows this area can help.
Documents that strengthen your case
Lenders want to see that your income is real and reasonably stable. Getting your paperwork in order before you apply saves time and avoids questions later.
- Two to three years of SA302 tax calculations and tax year overviews.
- Finalised accounts prepared by a qualified or chartered accountant.
- Recent business and personal bank statements.
- A note explaining any dip, such as a quiet year or a one-off cost.
Contractors and day rates
If you work on fixed-term contracts, some lenders will annualise your day rate rather than asking for years of accounts. A typical approach multiplies the daily rate by the days you work in a week and then across the year, with a margin for gaps. A track record of renewed contracts helps.
Common questions
How many years of accounts do I need?
Two years is the common benchmark, but some lenders accept one year, particularly if you have relevant experience and strong figures. A broker can point you to lenders comfortable with a shorter history.
Can retained profit in my company be used?
Some lenders will consider retained profit on top of salary and dividends, which can help directors who leave money in the business. It is a specialist area, so the right lender matters.
Does a quiet year rule me out?
Not necessarily. Lenders often look at an average or the most recent year, and a short explanation for a dip can reassure an underwriter. Consistent recent figures carry the most weight.
Are self-employed mortgage rates higher?
Not automatically. If your income is well evidenced you can often access the same deals as employed applicants. Higher rates tend to come into play only when the case is more complex.
Should I use an accountant?
Yes, where you can. Accounts signed off by a qualified accountant, along with SA302s, give lenders confidence and can widen your options.