Being self-employed does not stop you getting a mortgage, but lenders assess your income differently, so it helps to understand what they look for. This guide explains self-employed mortgages: what counts as self-employed, how income is assessed, the accounts you need, the tax trade-off, and how to give yourself the best chance.
What counts as self-employed
Lenders generally treat you as self-employed if you own a significant share of a business, often 20% to 25% or more, from which you earn your main income. This includes sole traders, business partners, contractors and limited company directors. There is no product called a self-employed mortgage; you apply for ordinary mortgages, but your income is assessed differently from an employee's, which is what people mean by a self-employed mortgage.
How income is assessed
How your income is assessed depends on how you trade. Sole traders are usually assessed on their net profit, and limited company directors on their salary plus dividends, or with some lenders salary plus their share of net profit. Contractors may be assessed on a day rate, as our guide to contractor mortgages explains. Knowing how a lender will assess your particular structure helps you approach the right one.
The accounts you need
Most lenders want to see at least two years of accounts or tax calculations to evidence your income, though some will consider one year if your case is strong, as our guide to newly self-employed mortgages explains. They typically average your income over the period, or use the latest year if lower. Having a solid trading history, with stable or rising income, strengthens your application considerably.
The documents lenders ask for
You will usually need to provide your SA302 tax calculations and tax year overviews from HMRC, business and personal bank statements, proof of identity and address, and evidence of your deposit. Limited company directors may also provide company accounts. Gathering these documents early, as SA302s can take time to obtain, helps your application run smoothly and shows the lender a clear, evidenced picture of your income.
The tax trade-off
There is an important trade-off for the self-employed: minimising your taxable income reduces your tax bill but also reduces the income a lender will use, lowering how much you can borrow. So aggressive tax efficiency can work against a mortgage. Considering this in the years before you apply, ideally with your accountant, helps you balance saving tax against showing enough income to borrow what you need.
Deposit and credit
Self-employed applicants do not always need a bigger deposit, and a strong profile can access the same rates as employees, though a larger deposit and clean credit always help, as our guides to your deposit and your credit score explain. A good credit history, a sensible deposit and well-evidenced income together make a self-employed application much more likely to succeed at a competitive rate.
Using a broker
Because lenders' criteria for the self-employed vary so much, in how they assess income, how many years they want, and how they treat company profits, a broker who knows the market can be especially valuable, matching you to a lender that suits your structure, as our guide to specialist lending relates. Approaching the right lender first avoids wasted applications and improves your chances of approval.
Sole traders in detail
If you are a sole trader, lenders usually assess your income on the net profit shown in your accounts and tax calculations, rather than your turnover. So the figure that matters is what your business makes after expenses, which is your taxable profit. Because heavy expenses reduce net profit, they also reduce the income a lender uses, which is part of the tax trade-off sole traders should bear in mind before applying.
Limited company directors
If you run a limited company, lenders typically assess your salary plus dividends, and some will also consider your share of the company's net or retained profit, which can help if you leave profit in the business. Not all lenders count retained profit, so the right lender matters if you do this, as our guide to limited company structures relates. Knowing how a lender treats company profit helps directors borrow what they need.
Boosting how much you can borrow
There are ways to improve your borrowing as a self-employed applicant: showing stable or rising income, keeping accounts up to date, not over-reducing taxable profit before applying, reducing other debts, and choosing a lender that assesses your structure favourably. A larger deposit and clean credit also help. Taking these steps in the run-up to applying can meaningfully increase what a lender is willing to offer you.
Common reasons applications are declined
Self-employed applications often stall for avoidable reasons: approaching a lender whose criteria do not fit your income structure, having heavily reduced taxable income, gaps in trading history, or incomplete documents. Understanding why these cause problems helps you avoid them, as our guide to newly self-employed mortgages relates. Applying to the right lender with well-prepared evidence is the best way to avoid a decline.
Self-employed and remortgaging
The same principles apply when you remortgage as a self-employed borrower: you will need to evidence your income with accounts and tax calculations, so keeping these up to date matters, as our guide to remortgaging explains. Staying with your current lender through a product transfer can sometimes involve lighter checks, which can be simpler for the self-employed, so it is worth comparing that against a full remortgage.
Preparing in advance
The best results come from preparing well before you apply. Keeping accurate, up-to-date accounts, having your SA302s and tax year overviews to hand, maintaining a clean credit file and a healthy deposit, and being mindful of the tax-versus-borrowing trade-off in the year or two before you buy all strengthen your position. A little planning ahead, ideally with your accountant aware of your plans, makes a self-employed application far smoother.
The reality for the self-employed
It is often said that being self-employed makes a mortgage much harder, but the reality is more that it is different rather than impossible. Lenders simply need to understand your income in the way it is structured. With solid accounts, the right lender and good preparation, many self-employed people borrow on the same terms as employees, so the key is presenting your income clearly to a lender that suits how you trade.
Treat your mortgage and your accounts as connected from the outset, keep good records, and choose a lender that understands how you trade, and being self-employed becomes simply a different route to the same goal rather than a barrier to owning your home.
In short
Self-employed mortgages are ordinary mortgages assessed differently: lenders treat you as self-employed if you own a fair share of your business, and assess sole traders on net profit, directors on salary and dividends, and contractors sometimes on a day rate. Most want two years of accounts, some one. Minimising tax reduces what you can borrow. A good deposit, clean credit and the right lender, often via a broker, give the best chance.
Where to get help and next steps
Read our guides to contractor mortgages, newly self-employed mortgages, and how much you can borrow. This is general information, not mortgage or financial advice.