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Self-employed: what a lender counts as income

Not turnover — and often not what you think of as your income either.

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2 minute readLast reviewed 13 September 2026Written by an adviser

There is no such thing as a self-employed mortgage. There are ordinary mortgages, assessed with a different view of your income, and that view varies more between lenders here than anywhere else in the market. Two lenders can read the same accounts and reach figures tens of thousands of pounds apart.

The job is matching the case to the lender whose definition suits how you are actually paid.

How each structure is read

Sole traderPartnershipLimited company directorContractor on a day rateHow a lender reads itNet profit, taken from the SA302 tax calculations. Usually an average of the last two years, or the most recent year if it is lower. Some lenders will use the latest year where it is higher, with an accountant’s comment on why.Your share of the net profit, again from the tax calculations. The partnership agreement may be asked for.This is where the spread opens up. Some lenders use salary plus dividends drawn. Others use salary plus your share of net profit after corporation tax, which helps considerably if you leave profit in the company rather than drawing it. A third group will consider retained profit on top. The right lender depends entirely on how you pay yourself.A number of lenders will work from the day rate itself — typically the daily figure multiplied by days worked per week and by a number of weeks — rather than from accounts at all. For a contractor with a short trading history that can be the difference between a mortgage and no mortgage.

If you are a company director who leaves profit in the business, the lender you approach matters more than almost anything else about the case. On dividends drawn you may look modest; on salary plus share of net profit you may look very different indeed.

The practical points

  • •Two years of figures is the common requirement. Some lenders will consider one, with a strong case behind it.
  • •Get your tax returns filed and the tax paid. An outstanding liability shows up, and it is a poor look.
  • •Do not reduce your declared income to the floor in the two years before you apply. Minimising tax and maximising borrowing pull in opposite directions, and you have to choose which one you are doing.
  • •A falling second year is read as a trend, and usually means the lower figure is used. If there is a reason — a one-off investment, a year of illness, a client lost and replaced — get your accountant to put it in writing.
  • •Keep business and personal banking properly separate. It makes the case readable, and an underwriter who can follow the money is an underwriter who says yes.

If you have just started

With less than a full year of trading the field narrows sharply. It is not always impossible — a contractor with a signed contract and a track record in the same field as an employee is a different case from a brand new venture — but it is worth having the conversation early rather than making an offer on a house first.

If you are about to go self-employed and you are also about to buy, the order matters enormously. Talk to somebody before you hand in your notice.

Your home may be repossessed if you do not keep up repayments on your mortgage. This guide is general information, not advice, and does not take account of your circumstances.

Carry on

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Two lenders, the same accounts, a very different answer.

Send us how you actually pay yourself and we will tell you which definition of income suits the case. On a limited company that is usually worth more than anything else.