How is Self-Employed Income Calculated for a Mortgage?

Picture of Ian Leyden

Ian Leyden

Ian is the Founder Director of Argyll Drummond

self employed mortgage

Securing a mortgage as a self-employed person might seem complex, but understanding how your income is calculated can clarify it. Mortgage lenders in the UK have criteria for working out the income figures used to determine your borrowing capacity. 

In this guide, we’ll break down the key factors that lenders consider.

Documentation is Key

When applying for a mortgage as a self-employed person, proof of your income is essential. Lenders typically require at least two or three years of accounts. This should include your tax calculations and tax overviews. These show your earnings trends, aiding lenders in assessing your income.

Annual Net Profit

Mortgage lenders often base their calculations on your annual net profit. This figure reflects your business’ overall finances after deducting expenses and taxes. Lenders typically consider the average net profit over the past two to three years to work out your income.

Salary and Dividends

If you’re a director of a limited company, your income might include a mix of salary and dividends. Lenders often consider your salary as part of your regular income, which shows a consistent earning pattern. Similar to sole traders, lenders will typically take an average of the past two to three years to work out your income. 

Retained Earnings

For self-employed individuals operating as limited companies, retained earnings is the share of profits not taken as dividends. Lenders might include a portion of retained earnings in your income calculation, as they reflect your business’s financial health and potential to repay the mortgage. 

Recent Performance

Lenders also consider your most recent business figures. If your income has been increasing, it could positively impact your borrowing ability. However, a recent fall in income might lead to more scrutiny, as lenders aim to ensure you can meet the mortgage payments.

Industry Trends

The nature of your business and its industry can influence how lenders assess your income. Some industries might experience changes that could affect your future earnings. Lenders will take these into account when looking at your application.

Future Earnings Projections

Giving future earnings projections can enhance your mortgage application. Highlight any upcoming contracts, business growth, or factors that show a likely increase in income.

Credit History and Affordability

While income is a crucial factor, lenders also consider your credit history and affordability. A good credit history will help lenders decide whether your projected mortgage payments align with your income and expenses. 


Starting the mortgage process as a self-employed individual requires a good understanding of how income is calculated. By preparing the proof of earnings, showing consistent income, and dealing with any concerns, you can increase your chances of getting the mortgage you need. 

Remember that each lender might have slightly different criteria and look at things in their own way, so it’s best to speak to a mortgage broker with expertise to find the best solution for your situation. 

Contact Argyll Drummond for an introductory chat. We’ll help you find the mortgage to match your unique financial situation and guide you toward your dream home.


Scroll to Top