If you work for yourself, getting a mortgage can feel harder than it should be — but it is very much possible. Lenders are used to self-employed applicants; they simply assess your income in a different way to someone on a fixed salary. This page explains, in plain English, how self-employed mortgages work, the different types of self-employed borrower, and the various ways lenders look at your earnings — and where a self-employed case can go wrong if it is placed with the wrong lender or sent in with weak paperwork.
Where Niche Advice Limited fits in
Plenty of self-employed people get a mortgage on the high street without any trouble. The cases that need a broker are the more complicated ones — and these are the situations Niche Advice Limited spends most of its time on:
- Declined elsewhere — a high-street lender said no, often because its assessment method didn’t suit how you actually earn.
- Complex income — salary plus dividends, salary plus net profit, retained profit left in the business, multiple income streams, or rising/falling earnings year to year.
- Short trading history — one year of accounts, or newly self-employed after leaving employment.
- Contractors and day-rate workers — including CIS subcontractors and umbrella-company contractors, where the “right” income figure isn’t obvious.
- Self-employed with adverse credit — defaults, CCJs or missed payments alongside self-employed income.
- Visa or residency considerations — self-employed applicants who are foreign nationals or on a visa.
A self-employed decline usually comes down to one of three things: the wrong lender (its income method didn’t fit your structure), weak documentation (gaps, late filings, figures that don’t reconcile), or a missing accountant’s letter where one could have supported the case. None of these means a mortgage is out of reach — they mean the application needs to be put together and placed with more care.
What “self-employed” means to a mortgage lender
There is no single legal definition of self-employed for mortgage purposes, and different lenders draw the line in slightly different places. Generally, you will be treated as self-employed if you own a meaningful share of a business (often 20–25% or more), or if your income depends on the success of your own work rather than a fixed wage paid by an employer.
That covers a wide range of people: a plumber trading as a sole trader, two friends running a café in partnership, a director who owns most of a limited company, an IT specialist on day rates, or a construction worker paid under CIS. Each earns a living differently, so each is assessed differently — the sections below walk through the main types.
The size of mortgage you may be able to borrow is based on your assessed income, much like an employed applicant. The work is in establishing what that income figure is — and that is where a broker can help you present your finances clearly.
Types of self-employed borrower
Sole traders
A sole trader is the simplest business structure: you and the business are the same legal entity. Lenders typically assess your income from your net profit — your business turnover after allowable expenses — as shown on your tax calculations. Most lenders will want to see a track record, commonly via your SA302 tax calculations and tax year overviews from HMRC. An adviser can help you find a lender whose criteria fit your trading record.
Partnerships
In a partnership, two or more people run a business together and share the profits. Lenders usually assess your share of the net profit rather than the total profit of the whole partnership. If your profit share has changed recently — for example, because you bought into the partnership — be ready to explain it, as lenders look closely at trends.
Limited-company directors
If you run a limited company, your income usually comes in two forms: a salary you pay yourself and dividends drawn from post-tax profits. This is where assessment varies most between lenders. Some look at your salary plus dividends; others — useful if you leave money in the business — consider your salary plus your share of net profit. The two methods can paint very different pictures, which is one reason directors benefit from advice on which lenders use which approach.
Contractors and day-rate workers
Contractors sit in a category of their own. A number of lenders assess contractors on an annualised day rate rather than digging through company accounts, which reflects current earning power rather than older accounts. Lenders that offer it usually look for a continuous contracting history and reasonable time left on your current contract.
CIS subcontractors (construction)
Under the Construction Industry Scheme (CIS), contractors deduct tax from your pay before you receive it. Your gross day rate and your net profit after expenses can look very different. Some lenders assess CIS workers on a gross day rate; others insist on net profit from your SA302s — and getting this wrong is a frequent cause of a CIS decline.
Umbrella-company contractors
If you contract through an umbrella company, you are technically employed by the umbrella and paid through PAYE, even though you find your own work. Lenders treat this inconsistently — some assess you on your contract day rate, others on your PAYE payslips. As with CIS, the lender you approach matters more than the label on your payslip.
How lenders assess self-employed income
One year of accounts versus a longer track record
Traditionally, lenders wanted two or three years of accounts. That remains common, but some lenders will consider applicants with just one year of accounts, provided the rest of the application is strong. A shorter track record can narrow your choice of lenders, so if you are newly self-employed it is sensible to get advice on timing.
The accountant’s projection letter
Where you have only one year of accounts — or your latest year is strong but not yet filed — a letter from a qualified accountant projecting your income can sometimes support an application that might otherwise be declined. It is not a guarantee, and not every lender accepts projections, but for the right case it can make a meaningful difference.
Latest year versus an average
Where you have two or more years of figures, some lenders take an average; others use your latest year, which helps if income is rising but can work against you if your most recent year was weaker. There is no single “right” answer — it depends on your numbers, which is what a broker can match to the right lender.
Salary plus dividends versus salary plus net profit
- Salary plus dividends counts the money you have actually drawn out of the company.
- Salary plus net profit counts your salary plus your share of the company’s profit, whether or not you have drawn it.
If you have been leaving profit in your business, the salary-plus-net-profit method can reflect a higher income because it does not penalise you for being prudent. Not all lenders offer it — a key area where advice can make a real difference.
Retained profit
Retained profit is money your limited company has made but kept in the business. A lender assessing you purely on salary plus dividends may not “see” that retained profit at all. Lenders that consider net profit can give a fuller picture — if this describes your situation, flag it early so the right lenders can be approached.
Using an accountant and SA302s
Whatever your structure, good evidence makes a self-employed application smoother. The two documents lenders most often request are your SA302 tax calculations and your tax year overviews. Many lenders also accept a reference or certified accounts from a qualified accountant. Keep your accounts up to date and your tax filings current, because gaps can slow things down.
Have a self-employed case that needs a closer look?
Talk it through with a specialist adviser — no obligation.
Documents lenders commonly ask for
| Document | Who it typically applies to | Why the lender wants it |
|---|---|---|
| SA302 tax calculations | All self-employed (usually 1–3 years) | Confirms declared income and tax due |
| Tax year overviews | All self-employed | Cross-checks the SA302 against HMRC records |
| Finalised / certified accounts | Sole traders, partnerships, directors | Shows turnover, profit and the business’s health |
| Accountant’s reference or projection letter | Directors, short-history cases | Confirms figures; can support a forecast |
| Business and personal bank statements | All self-employed | Evidences income flow and outgoings |
| Contracts / day-rate evidence | Contractors, CIS, umbrella | Supports an annualised day-rate assessment |
| CIS statements / payslips | CIS and umbrella workers | Shows gross pay and deductions |
Comparing the assessment routes
Different methods suit different people. The table below is a plain-English summary. No figures, rates or income multiples are shown — your own numbers and lender choice determine the outcome.
| Assessment route | When it may fit | When to be cautious | Advice needed? |
|---|---|---|---|
| Net profit (sole trader / partnership) | Steady or rising profit, good records | Heavy expense claims reduce the figure lenders see | Yes |
| Salary plus dividends (director) | You draw most profit out as dividends | Understates income if you retain profit | Yes |
| Salary plus net profit / retained profit (director) | You leave profit in the company | Fewer lenders offer it | Yes |
| Annualised day rate (contractor) | Continuous contracting, decent contract length | Gaps or short remaining contract | Yes |
| Gross day rate vs net profit (CIS) | High invoiced day rate, low net profit | Net-profit-only lenders may show a lower figure | Yes |
| One year of accounts (+ projection) | Newly self-employed, strong/rising income | Narrows lender choice; not all accept projections | Yes |
A balanced view: the realities to keep in mind
Self-employed mortgages are widely available, but it is fair to set out the limitations alongside the possibilities. Your choice of lender may be narrower than for an employed applicant, particularly with a short trading history or fluctuating income. The income figure a lender uses may be lower than the money you feel you earn. Affordability assessments still apply in full, and your wider credit profile and outgoings matter just as much as your income. None of this puts a mortgage out of reach — it means presentation and lender choice count for a lot, which is where impartial guidance pays off.
Tool: which income figure would a lender use?
Different lenders read the same set of accounts in different ways. Our figure-free income-method illustrator lets you see, for a worked example, how salary, dividends and a share of net profit feed into each assessment method. It is an educational illustration only: it does not calculate a loan amount, apply an income multiple, or tell you what you can borrow.
Explore the income-method illustrator on our tools and calculators page, then speak to a qualified adviser about your own figures.
Frequently Asked Questions
Straight answers from a specialist mortgage broker.
How many years of accounts do I need to be self-employed and get a mortgage?
I’m a director who keeps profit in the company. Will lenders ignore that money?
What documents will I be asked for?
Does being a contractor make a mortgage harder?
I’m a CIS subcontractor — is my income my day rate or my net profit?
Can an accountant’s letter help if I only have one year of accounts?
Related guides: bad-credit / adverse-credit mortgages, professional and high-income mortgages, foreign national and visa mortgages.
This page is information, not advice — it explains the landscape, it does not recommend a product or course of action. Speak to a qualified adviser about your own circumstances. We do not provide tax advice; for questions about your tax position, please consult a qualified accountant.
Self-employed? Talk it through with a specialist
Sole trader, contractor or limited company director — we look at how lenders assess your income and which approach fits your figures.
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