What you need to know when it comes to Getting a Mortgage as a Self-Employed or Small Business Owner
Buying a home is an exciting milestone, but if you’re self-employed or run a limited company, you may already have heard that the mortgage process can be a little more complex. It’s not impossible (far from it), but lenders often take a different approach to assessing your income compared to someone on a regular salary.
As accountants, we can’t give you specific mortgage or borrowing advice, but we can help you prepare your numbers and plan ahead so that when the time comes, you’re in the best possible position.
We also highly recommend working with an experienced mortgage broker who understands the self-employed and small business sector; contact us for recommendations of who to work with, based on your individual needs. You should check that the broker you’re working with is registered with the FCA using their register.
Here are some key things to consider:
If You’re Self-Employed (Sole Trader, Partnership, or LLP)
- Income is often averaged over 2–3 years
Most lenders will look at your average taxable income over the past two years. If your income has dropped in the most recent year, they may go back three years and use a lower average. - Turnover is not the same as income for mortgage purposes
Lenders will focus on your taxable profit, not your sales figure.
This is after deducting allowable expenses such as new equipment, tools, or vehicles. While claiming these reduces your tax bill (which is good for tax efficiency), it can also reduce the income figure a lender uses to assess affordability. - CIS Subcontractors
Some lenders may treat your income similar to an individual with a salary, whilst others will consider you self-employed and take your taxable profit numbers. We recommend using a mortgage broker who is familiar with self-employed and CIS so they can advise you appropriately.
If You’re a Small Business Owner (via a Limited Company)
- Your share of ownership matters
Lenders will consider the proportion of the company’s profit you’re entitled to, based on your shareholding. If you own a smaller proportion, for example, less than 20-25%, a lender may not consider the Limited Company profits. - Timely and accurate financial statements are key
Lenders often want to see your final filed accounts at Companies House. While you have up to nine months after year-end to submit them, leaving it until the last minute can delay your mortgage application. - Tax computations must match HMRC records
You’ll usually need to provide both your tax computation and a Tax Year Overview from HMRC and the figures must match. Again, timely filing helps. - Consider your approach to drawings
If you keep most profits in the company to minimise personal tax, some lenders will only consider the salary and dividends you’ve actually drawn. Others may consider retained profits too but you’ll need a lender that works this way.
If you plan to take a large lump sum (e.g. for a deposit), this could push you into higher-rate tax, so planning withdrawals over time may be more tax-efficient. - Overdue tax liabilities are a red flag
Personal or business tax debts can make lenders nervous. Aim to clear these before applying for a mortgage. - Accountant’s Certificates
Your lender may require an Accountant’s Certificate — this must be completed by a qualified accountant registered with a recognised body, such as ACCA, AAT or ICAEW.
This certificate asks your accountant to verify your personal and company earnings, and may also request:- Projections of future income.
- Confirmation that your earnings and drawings are sustainable.
- Disclosure of any anomalies or exceptional items that may have affected your figures.
Having an accountant who knows your business inside-out makes this process smoother and more credible for the lender.
The Role of Your Accountant: How Brisan Can Help You
- We make sure your financial records are accurate, up-to-date, and clearly presented for your mortgage application.
- We help you understand the tax implications of your income, drawings, and planned withdrawals so you can make informed decisions, from basic tax planning services to more complex strategic planning.
- We work closely with your mortgage broker to ensure they have the right figures and supporting documentation, including completing Accountant’s Certificates where required.
- Lenders are clued up to how the numbers can be manipulated – they will flag up on sudden increases in salaries and profits. We can support you with legitimately growing the numbers and your business strategy so you can achieve your business goals, through out Clarity and Insight services.
The mortgage process for self-employed individuals and small business owners can be more involved, but with early planning, the right figures in place, and a broker who understands your situation, you can put yourself in a strong position to secure the finance you need.
