Self-employed and complex income mortgages

A self-employed mortgage is a standard residential mortgage or remortgage for a borrower whose income comes from their own business rather than a salary. Sole traders, partners and limited company directors are all assessed this way. The product is the same as for employees, but lenders look at business income over time instead of payslips.

Many lenders lend to self-employed borrowers, and the main difference is the evidence. Income that rises and falls, or comes from more than one source, takes more explaining, which is why a clear record helps.

Sole traders and partners are usually assessed on their net profit, taken from SA302 tax calculations and tax year overviews. Lenders average the last two years, or take the latest year if income is rising, and some accept one year. Partners are assessed on their share of the partnership profit, shown on their tax return.

Expenses reduce taxable profit, so borrowers who claim large expenses may show a lower income than they live on. Lenders work from the declared figures, so planning ahead of an application can matter.

Self-employed borrowers can remortgage to a new lender, or switch to a new deal with their existing lender through a product transfer. A product transfer usually needs few or no income checks, which can help if income has dipped. Moving to a new lender means a full application with up-to-date accounts or tax calculations.

Remortgaging to raise money for the business, or to consolidate debts, is assessed on the same income figures, and lenders ask what the money is for.

Directors of their own companies are often better served by lenders that use their share of profit, explained on the limited company director mortgages page.

Complex income covers borrowers with several sources, such as a business, a salary, rental income and dividends, or income that changes a lot from year to year. Some lenders are happy to combine sources, and others count only one. A fall in income, a recent change of business structure or a short trading record narrows the choice.

Lenders look for an explanation where income has moved sharply. An accountant's letter setting out the reasons, and the outlook, can help an underwriter accept the figures.

Lenders usually ask for two years of SA302 tax calculations with matching tax year overviews, or accountant-prepared accounts, plus personal and business bank statements. Some ask for an accountant's reference or certificate, and some will use the latest year alone. Contractors may be assessed on a current contract instead.

Filing tax returns early in the year means newer figures are available sooner, which helps when income is rising.