Being your own boss has plenty of benefits — but when it comes to getting a mortgage, being self-employed can sometimes feel like a challenge. Lenders often want extra proof of your income, and the process isn’t always straightforward.
But here’s the good news: getting a self-employed mortgage in the UK is possible. With the right preparation, you can put yourself in a strong position to buy your dream home or secure your next remortgage.
This guide explains everything you need to know about self-employed mortgages, including how income is assessed, the documents lenders will ask for, and tips to boost your chances of approval.
How does a self-employed mortgage work?
There isn’t a special product called a “self-employed mortgage” — you’ll be applying for the same mortgages as employed applicants. The difference is in how lenders assess your income. If you’re self-employed, lenders want to be sure your income is stable and sustainable, so they’ll ask for extra documentation compared to someone on PAYE.
Who Counts as Self-Employed for a mortgage?
You’re classed as self-employed if you earn your income through:
• Being a sole trader – you file a tax return each year and your income is based on Net profit at the end of each year.
• Partnership – your share of the profits counts as your income each year.
• Limited company director – If you won more than 20% of the shares within a company a lender will class you as self-employed. If you own less than 20%, they will class you as employed. lenders usually consider your salary + dividends, which you pay yourself from your LTD company. Although some lenders may use your salary and share of net profit each year instead, this can often work in your favour as your net profit is usually higher than the dividend you take.
• Contractor or freelancer – you may need to show contracts or an average of your day rate. Lenders will class contractors as self employed if they pay their own tax via self-assessment, rather than their employer paying at source for them.
How Do Lenders Assess Income for Self-Employed Mortgages?
Lenders want to see consistent, provable income. Typically, they’ll ask for:
• 2 years of SA302s or tax calculations from HMRC (for sole traders/partners/LTD company directors).
• Company accounts (for limited company directors).
• Business bank statements to check cash flow.
• Proof of future contracts (for contractors).
Some specialist lenders may accept just 1 year of accounts, which is useful for newer businesses.
Lenders will assess your income over the last 2 years and average this out to give you the figure that they can use. As self-employed income can fluctuate from year-to-year lenders use an average to gain a longer-term view of your income.
Self-Employed Mortgage Criteria
Every lender is different, but most will look at:
• Income stability – is your business profitable year after year?
• Credit score – have you managed your personal and business finances well?
• Deposit – the bigger your deposit, the lower the risk for the lender.
• Affordability – lenders will stress-test your income against outgoings and potential interest rate rises.
Tips to Improve Your Chances of Mortgage Approval
1. Keep your accounts up to date – Use a qualified accountant to prepare your accounts. As of the 1st of October, each year, lenders will require evidence of the most recent years self-assessment. This is because the year before this will be 18 months old, and no longer a true reflection of your current income.
2. Submit your tax returns early – lenders usually want the latest figures.
3. Save a bigger deposit – aim for at least 10%, but 15–20% can unlock better rates. A higher deposit isn’t essential, but with any residential mortgage, the bigger the deposit the better as this unlocks better interest rates which can save you £1,000s.
4. Improve your credit score – pay bills on time, clear debts, and avoid overdrafts.
5. Separate business and personal finances – keep clean records. Avoid using the same bank account for both personal and business use. Keeping them separate can clearly show a lender which expenses are paid for by the business and which ones are personal.
6. Work with a mortgage broker – an independent adviser (like us!) can match you with lenders who understand self-employed clients.
Common Questions About Self-Employed Mortgages
How long do I need to be self-employed to get a mortgage?
Ideally 2 years with 2 years of self-assessments (and/or company accounts) as this will meet the criteria of all lenders giving you more lending options to choose from.
Can I get a mortgage with only 1 year of accounts?
Yes — some lenders will accept one year, though your options are more limited. These lenders will want to see you working in the same line of work for several years e.g. you are a plumber who was employed for several years before taking the leap to go self-employed. This gives lenders confidence you will be successful in this field.
Can retained profits in my company be used?
Most lenders won’t, but some specialist lenders will consider net profit instead of just salary + dividends.
Is it harder to get a mortgage if I’m self-employed?
Not harder — but you need to provide more evidence. Preparation is key.
Why Use a Mortgage Broker for Self-Employed Mortgages?
Some mainstream lenders take a cautious approach with self-employed borrowers; this was especially evident during COVID but has since eased. A mortgage broker specialising in self-employed mortgages knows which lenders are more flexible and can save you time, stress, and money. A good independent mortgage adviser will also know which lenders use salary + dividends and which ones use salary + net profit to help stretch your mortgage affordability.
At Green & Green Mortgage and protection, we’ve helped self-employed people across Hull and East Yorkshire — from sole traders to directors with complex company accounts — secure the right mortgage.
Getting a mortgage when you’re self-employed isn’t impossible — it just takes the right preparation and guidance. By keeping your accounts in order, saving a solid deposit, and working with the right broker, you can access competitive rates and get one step closer to your next home.
Thinking about buying or remortgaging? Get in touch with us today to explore your self-employed mortgage options.
.
Share this post: