If you work for yourself, you might have heard that getting a mortgage is harder. The truth is simpler. Lenders just need clear, consistent evidence of your income and a sensible story about how you earn it. This guide explains exactly what documents prove your income, how affordability is worked out for sole traders, limited company directors, contractors and freelancers, and what to do if you only have one year of trading.
What counts as proof of income when you are self‑employed?
Lenders need to see what you actually declared to HMRC, not just what you invoiced. Expect to provide:
* SA302s or Tax Calculations. These show your taxable income from your submitted Self Assessment return. You can download them from your HMRC online account or ask your accountant.
* Tax Year Overviews. These confirm HMRC received your return and the tax due or paid. Lenders often want the Tax Calculation and the matching Tax Year Overview for the same years.
* Business accounts. For limited company directors, most lenders want full signed accounts prepared by a qualified accountant. Some accept abbreviated or micro-entity accounts alongside HMRC evidence.
* Accountant’s reference. Certain lenders will accept a signed accountant’s certificate confirming your income, especially if you have a short trading history or a growing business.
* Bank statements. Typically three months of personal and business statements to evidence income flow and day-to-day outgoings.
Contracts and day rate evidence. Contractors are often assessed on a day rate; lenders may ask for your current contract, renewal letters and a CV. Tip: make sure names, UTRs, company numbers and dates align across documents. Mismatches cause delays.
How affordability is assessed for each self‑employed route
Lenders all aim to answer the same question, how stable and sustainable is your income? The method depends on how you trade.
Sole traders and partners
Most lenders use your net profit figure, usually called total income or taxable profits, from SA302s.
They often take an average of the last two or three tax years. If the latest year is lower, some will use the latest year only.
Add-backs are rare. Expenses you claimed to reduce tax will generally reduce mortgage affordability.
Limited company directors
Many high street lenders use salary plus dividends you received.
Some specialist and a few mainstream lenders may use your share of net profit or retained profits, especially if you keep earnings in the business. Criteria vary, and evidence must be strong.
The number of years’ accounts matters. If profits rise sharply, some lenders still average across years; others can take the latest year with an accountant’s letter.
Contractors and freelancers
Day rate calculations are common. A typical approach is day rate multiplied by 5 days, then by 46 to 48 working weeks. For example, £400 per day might be assessed as £400 x 5 x 46 = £92,000.
Inside IR35. Some lenders will treat you more like an employee, assessing based on payslips and umbrella income. Others still accept contract-based calculations if your contract terms support it.
Outside IR35. Contract-based income is widely accepted with evidence of continuity, such as back-to-back contracts, renewal history or a track record in the same field.
Whichever path you take, lenders then apply their affordability calculators. These look at your income, regular commitments, credit profile, dependants, and the property’s loan-to-value. Expect stress testing at a notional interest rate above your pay rate.
How many years of accounts do you need?
Typical ask. Two years is the sweet spot for most lenders.
Three years. Improves choice and borrowing options, especially if income fluctuates.
One year. Possible with the right lender, strong other factors and clean credit. See next section.
Can you get a mortgage with only one year’s accounts?
Yes, it is possible. You will usually need:
Your first full year’s SA302/Tax Calculation and matching Tax Year Overview.
Final signed accounts prepared by a qualified accountant.
Evidence of current trading, such as management accounts or an accountant’s projection.
For contractors, a current contract with good continuity and CV.
Rates and maximum lending can be tighter than if you had two or three years, but mainstream and specialist options do exist when the case is sensibly packaged.
How many months do you need to be self‑employed?
Most lenders want at least 12 months of trading with filed figures. A few will consider six to eleven months in niche scenarios, often on a case‑by‑case basis with strong previous industry employment, but expect a smaller panel and more conservative borrowing.
Salary, dividends, and retained profits for company directors
Salary plus dividends is the standard calculation for many lenders. If you keep dividends low to save tax, this can reduce your borrowing.
Some lenders will consider your share of net profit before tax, or profit plus salary, especially where retained profits are consistent and the company has a healthy balance sheet.
Evidence that helps, full accounts with detailed profit and loss, balance sheet, notes on director’s remuneration and dividends, and sometimes an accountant’s letter to explain year-on-year changes.
The right route depends on your goals. A broker will match your profile to a lender that credits your income in the most favourable way.
Day rate calculations in practice
Contractor assessments can differ, so check the fine print:
Standard method. Day rate x 5 x 46 to 48 weeks.
Gaps and holidays. Some lenders reduce the weeks to allow for breaks, which lowers the annualised figure.
Inside IR35. Lender may ask for payslips and P60s from your umbrella, then apply standard employed affordability.
Outside IR35. Provide your contract, renewal history and business bank statements to confirm day rate and continuity.
Is it hard for a self‑employed person to get a mortgage?
It is not hard when your documents are complete and the case is presented to a lender that understands your income. The challenge is matching your situation to criteria and preparing the paperwork so an underwriter can say yes without going back and forth.
Who is the best mortgage lender for self‑employed people?
There is no single best lender. Criteria differ on averaging years, use of retained profits, contractor day rate rules, and tolerance for recent changes. The best fit is the lender whose policy aligns with your income pattern, deposit, credit profile and property. That is exactly where a broker adds value.
How banks calculate mortgages for the self‑employed
Start with your assessable income based on your trading type.
Adjust for how many years are averaged and any downward trends.
Apply a stress rate to test affordability at a higher interest level.
Deduct committed outgoings, loans, credit cards, childcare, student loan, and regular costs.
Check loan‑to‑value limits against your deposit and property type.
Run credit scoring and underwrite the documents you provide.
How a broker packages complex income
A good broker will:
Review your SA302s/Tax Calculations, Tax Year Overviews and accounts for consistency.
Identify the most favourable income method, salary plus dividends or profit share or day rate.
Prepare a cover note to explain any dips, pandemic impacts, one‑off costs or growth.
Pre‑check your case with underwriters where policy is nuanced, for example retained profits or recent incorporation.
Manage the application end‑to‑end, so you avoid delays and last‑minute document requests.
If you want local, specialist support, our team are experienced mortgage brokers for self employed in southend. We can also help you secure a strong southend mortgage agreement in principle quickly so you can view homes with confidence.
Documents checklist to get mortgage‑ready
Last two or three SA302s/Tax Calculations and matching Tax Year Overviews.
Last two or three years’ full signed accounts, where applicable.
Latest three months’ personal and business bank statements.
Current contract and CV for contractors, plus renewal evidence where possible.
Photo ID and proof of address.
Details of deposits, debts and financial commitments.
Get these ready early. You will save weeks in underwriting.
Summary
Self‑employed mortgages are all about clear evidence and the right lender fit. Prove income with SA302s or Tax Calculations and Tax Year Overviews, add full accounts if you run a company, and show contracts and continuity if you are a contractor. Most lenders want two years of figures, but one year is possible with the correct packaging. Affordability uses your trading type, averaged years and a stress rate, then factors in your regular spending and debts.
If you would like friendly, expert help making the numbers work, speak to an independent mortgage advisor leigh-on-sea for a free initial conversation and to compare mortgage deals in leigh-on-sea. We specialise in clear advice for self‑employed clients and can guide you from first chat to offer.
