Self Employed Mortgage Options
Self employment comes in many forms - sole traders, partnerships, limited company directors, and contractors all have different income structures. Lenders assess each type differently, and what works for one self-employed borrower may not suit another. The key to success is finding lenders whose criteria match your specific circumstances, particularly if you're looking to remortgage and want to ensure a smooth application process.
Many high street lenders have become more accommodating to self-employed applicants in recent years. However, specialist lenders often offer more flexibility, especially for complex income situations or where traditional affordability calculations don't capture your true earning capacity.
Documentation Requirements
Most lenders require at least two years of accounts or tax returns for self-employed applicants. You'll typically need SA302 tax calculations from HMRC along with corresponding tax year overviews. Limited company directors should also have company accounts prepared by an accountant. Some lenders will consider applications with just one year's evidence, though options are more limited.
Prepare your documents before applying to speed up the process. Lenders may also request bank statements showing business income, contracts for ongoing work, and projections for future earnings in some circumstances.
How Lenders Calculate Self Employed Income
Income calculations vary significantly between lenders. Sole traders and partnerships are usually assessed on net profit (before personal tax). For limited company directors, some lenders use salary plus dividends drawn, while others consider your share of net profit or retained earnings. This means the same accounts can produce very different borrowing amounts depending on which lender you approach.
Our brokers understand these differences and can identify which lenders will offer the best affordability calculation for your specific income structure. This knowledge can significantly increase your borrowing capacity.
Contractors and IR35
Contractors face additional complexity, particularly around IR35 status. Some specialist lenders offer contractor-specific products that calculate affordability based on your daily rate rather than dividends, potentially increasing borrowing capacity significantly. These products recognise the stability of contract work and the earning potential it represents.
Whether you work inside or outside IR35, through an umbrella company or your own limited company, there are mortgage options available. Our brokers can match you with lenders who understand contractor income.