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Income evidence

Self-employed mortgage income

Self-employed applicants are not one category. Lenders ask how you trade, how long you have traded, and which documents prove the income they will use. Property Money Limited publishes this as general information only — not advice.

The problem

Payslips and employer references do not map cleanly onto trading income. People often assume an SA302 alone replaces a salary. It does not — or not in the same way for every structure. Limited company directors, partners and CIS subcontractors are assessed differently from a sole trader with two years of tax returns.

What usually matters

• Years trading. Many lenders want two or three years of accounts or tax calculations. Some specialists will look at one year plus an accountant’s certificate or projection — on tighter terms.
• Sole trader. Net profit on tax calculations / SA302s (and often tax year overviews) is the usual starting point. Averaging rules differ by lender.
• Partnership. Your share of net profit — not the whole firm’s top line. Partnership accounts and SA302s usually travel together.
• Limited company. Salary plus dividends is common on the high street; some lenders will use a share of net profit (and sometimes retained profit) where criteria allow. Director % share matters.
• Accountant’s certificate / projection. Useful when the latest year is incomplete or when a lender accepts a projected figure — it is not a blank cheque.
• CIS. Construction Industry Scheme income is generally treated as self-employed, not PAYE employment, even when tax is deducted at source.

Paths that often help

• Match the evidence pack to the structure: SA302s and overviews for sole traders; accounts plus personal tax for directors; clear % ownership for partnerships and Ltd shares.
• Ask which income method the lender uses before you chase a headline multiple — net profit vs salary/dividends changes the number.
• If trading history is short, expect specialist criteria, lower LTV, or a wait until a second year lands.
• Keep personal and company borrowing visible; affordability still nets commitments against the income figure the lender accepts.

Mortgagability in plain terms

Mortgagability for the self-employed is mostly: will a lender accept this definition of income for this structure, for long enough history, at the LTV you need? SA302s help sole traders; they are not a universal payslip substitute for every company director. Our calculator does not underwrite income — it only illustrates payments.

Common mix-ups

Retained profit in a limited company is not always treated the same as money you have already taken out. Some lenders will consider a share of net profit; others stick closer to salary and dividends. Assuming “the company made it, so I can use it” is where disappointment starts.

Contractors and umbrella workers sit in another pattern — day rates, contracts and IR35 status can matter more than a classic sole-trader SA302 pack. Say what you actually are when you enquire; the label “self-employed” is too broad on its own.

If accounts are still being finalised, ask whether a draft plus an accountant letter is enough for an initial view, or whether you should wait for signed figures. Rushing on incomplete numbers often costs more time than waiting a few weeks. Self-employed households also often carry the business and the mortgage on fewer shoulders — the protection gap page is there if that question is on your mind (illustrative only).

Year-on-year drops need a plain explanation. A lender that averages two years may still proceed; one that takes the latest year only may not. Neither approach is wrong — they are different methods. Your job is to know which method you are being measured against before you spend money on valuations.

Directors who pay themselves irregularly should expect questions about sustainability. A single large dividend in a quiet trading year can look like cherry-picking unless the accounts tell a consistent story.

Next step

Structure, years trading, and what you can evidence usually beat a rough turnover figure. Start there.