Self-Employed or a Limited Company Director and Looking for a Mortgage? Here’s What You Need to Know
At The Surrey Mortgage Broker we have been helping people get mortgages for over 20 years. One of the biggest areas we excel in is helping those who are classed as self-employed. You might not be aware that as a limited company director you are also classed as self employed. Often we are approached by people running their own company which is paying their salary and they think they should be treated as a standard employee, however that is not the case.
As a rule of thumb if you have a share in a business of 25% or more then lenders will class you as self-employed. This means that, again, as a rule of thumb, that you will need to have been trading for a minimum of two years to apply for a mortgage (there are some exceptions to this rule).
So if you fall into the category of sole trader or limited company director then you’ll need to read on to find out what we need from you for a mortgage application.
Tax Calculations (formerly SA302s)
This is the document produced when you submit your tax return, or if you use an accountant they will produce it for you. The document shows to lenders what your profit before tax is on a personal level, if you are a limited company director there is another way to confirm income so you’ll need to read on.
They’ll usually want:
The last two years of Tax Calculations
An average of your Net Profit across those years (or salary plus dividends if you're a director)*
Lenders will not accept tax calculations that are more than 18 months old. They work from April each year in line with the tax year therefore the 18 month cut off comes in October each year. So at the time of writing in July 2025 we can accept the tax calculations from 2023 and 2024, after October we can only accept the tax calculations from 2024 and 2025.
Don’t Forget Your Tax Year Overviews
Along with your Tax Calculations, lenders will also ask for your Tax Year Overviews—these confirm you’ve actually paid the tax due. The figures on both documents must match exactly, down to the penny.
If you're unsure how to get these from HMRC, here's a quick guide:
How to Download Your Tax Documents from HMRC
To get your Tax Calculations (SA302s):
Log in at www.online.hmrc.gov.uk
Click on “Self-Assessment”
Select “Tax Return Options”
Choose the relevant tax year
Click “View Calculation”
Then click “View and Print Your Calculation”
Select “Print Your Calculation”
To get your Tax Year Overviews:
Log in to your HMRC account
Click on “Self-Assessment”
Select “View Account”
Click on “Tax Years”
Choose the relevant year and hit “Go”
Select “Print Your Tax Year Overview”
If you have an accountant, they should be able to do this for you too.
Alternative Income Verification for Limited Company Directors
As an alternative to Tax Calculations some lenders will look at how profitable your limited company actually is. As with the above you need to have two years accounts. On your full set of audited accounts we will be able to see director’s remuneration (salary) and company profit. Often if there is profit in the business but you have not taken this as dividends it could mean your borrowing capability is increased.
The lenders will look at your income as:
· Director’s remuneration PLUS
· Applicant’s share of net profit after corporation tax (some lenders will look at profit before tax too)
So how can this method of calculating your income benefit you if you are a Limited Company Director? Lets do a working example:
Richard is 100% shareholder of ABC Limited and the company is very profitable. He takes a salary of £12,570 (director’s remuneration) and takes dividends of £37,700. This keeps him under the threshold where his personal tax liability will rise. However the company has made an average of £100,000 profit for the past two years after corporation tax.
Using the Tax calculation method above then a lender will consider his income as £50,270 per year. However using the alternative method it will be:
· Director’s remuneration of £12,570 PLUS
· Applicant’s share of net profit after corporation tax, in this case £100,000
So in our example Richard’s income is £112,570 so more than double. This doesn’t necessarily work for everyone, but by talking to a good broker they will analyse your situation and recommend the best course of action.
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