How lenders think about income
Unlike a salaried applicant with payslips, you’re asking a lender to trust a picture built from accounts, tax returns and bank behaviour. Most will work from your share of net profit (or salary plus dividends if you’re a director) after tax — not turnover, and not what’s left in the business account if you haven’t declared it.
They usually want a track record: often two years of accounts or SA302s, sometimes one year with a strong story. A sudden spike or drop in profit will get questions; consistency and clarity win.
What to have ready
Typically: SA302s / tax year overviews and tax calculations, full accounts or accountant’s certificates, business bank statements, and personal bank statements. If you’re a limited company, know your salary vs dividends and what profit you’ve retained — some lenders use retained profit; others won’t touch it.
An accountant who understands mortgage underwriting is worth their fee. The way figures are presented on a tax return can help or hurt you.
Retained profits and “my business can afford it”
This trips people up constantly. You might have six figures sitting in the company — but if only a modest salary and dividends show on your tax return, many high-street lenders only lend on what’s been taken as income. Specialist lenders exist for those who need affordability based on share of profit or retained earnings.
Common pitfalls
Changing your accounting year-end right before an application. Large one-off expenses that depress profit on paper. Mixing personal and business spending on the same card. Taking a mortgage payment holiday during Covid without understanding how it reads on your file. Taking new credit just before you apply. None of these are necessarily fatal — but they all need explaining in the right order.
What I do differently
I match your actual income story to lenders who underwrite that way — not the other way round. If you’re self-employed and you’ve been told “computer says no,” get a second look before you give up.
This guide is general information, not personal advice. For a view on what you could borrow, start a fact find and we’ll go from there.
Your home/property may be repossessed if you do not keep up repayments on a mortgage.
There may be a fee for mortgage advice. The precise amount will depend on your circumstances.