Self-Employed Mortgages, Sole Traders, Directors and CIS

What is a self-employed mortgage?

A self-employed mortgage is a residential or buy to let mortgage for a borrower whose income comes from self-employment, a partnership or a company they control, assessed on business income evidenced by HMRC records, accounts or contracts. There is usually no separate self-employed product. The loan is the same residential mortgage an employee would take, and the lender reads and evidences the income differently. A mortgage on a home you will live in is normally a regulated mortgage under the Financial Conduct Authority's conduct rules (MCOB), which apply to employed and self-employed borrowers alike, with the evidence varying by employment status. Under those rules a lender must obtain evidence of the income it relies on, from a source independent of the borrower, and cannot accept a borrower's own statement of it. The FCA's guidance adds that for a self-employed borrower a lender may consider projections of future income where they form part of a credible business plan (FCA Handbook: MCOB 11.6.8R and 11.6.9G).

Lenders generally treat as self-employed anyone who works for themselves: sole traders, partners and members of a limited liability partnership, contractors paid through their own company, subcontractors under the Construction Industry Scheme (CIS) and freelancers. A company director counts once their shareholding reaches the lender's threshold, and a director with a smaller holding is usually assessed as an employee on payslips. The lender goes by the tax position: how the income reaches you and which HMRC records show it.

Each structure has its own page with the full assessment:

• Sole trader mortgages: net profit from the Self Assessment return.
• Mortgages for limited company directors: salary and dividends, or salary and a share of the company's profit.
• Contractor mortgages and IT contractor mortgages: the day rate, annualised.
• CIS mortgages: pay under the Construction Industry Scheme.
• One year self-employed mortgages: the first year or two of trading.
• Buy to let for self-employed borrowers: the rent first, with personal income behind it.

Mortgage Lane arranges mortgages for each of these structures: purchases, first-time buyers, remortgages and buy to let, including cases with one year's figures, profit that has risen or fallen, and past credit problems. Self-employed first-time buyers use the same deposit routes and schemes as anyone else, such as a gifted deposit from family, and the first-time buyer mortgage guide covers them.

Self-employed mortgage rates

Self-employed mortgage rates are set by each lender, by product and loan to value band, in the same way as for employed borrowers. A self-employed borrower who meets a mainstream lender's standard criteria is generally offered the same products as an employee, priced on the loan to value and the credit history. A specialist lender, and its pricing, usually comes in where mainstream criteria do not fit: less than a year's figures, a steep fall in profit, retained profit that few lenders count, or adverse credit. Specialist products are often priced higher, and product fees vary in the same way.

Comparing lenders on rate alone can mislead a self-employed borrower, because each lender's income method sets how much it will lend. A lower rate from a lender that reads only a director's dividends may buy less house than a slightly higher rate from one that counts the director's share of company profit. The length of a fixed rate matters too when profit is rising, since a shorter fix can end after the next tax return, when a higher figure may be available. A longer fix gives certain payments for longer but can carry an early repayment charge if you leave early. Some self-employed borrowers hold their tax reserve against the mortgage in an offset mortgage, where the savings reduce the interest charged until the tax bill is paid.

Working for yourself? Get in touch with your last two years' tax calculations or accounts. We work out your income on each lender's method before choosing where to apply.

Self-employed mortgage criteria

Lenders check the same points on every self-employed case, and each sets its own limits for them. The evidence row and the tax position row rest on published rules, as at October 2026. The shareholding thresholds, the 48-week contractor basis, the income multiple and the loan to value, credit and buy to let figures are Mortgage Lane's experience of the lenders we use, and the other rows describe how lenders differ. The lender's underwriting decides each case. Our 95% mortgages page covers borrowing at the top loan to value band.

Types of self-employed borrower, and how each is assessed

Lenders read each structure from different records, so the first question on any case is how the business is set up.

Sole traders

A sole trader is assessed on net profit: turnover less allowable expenses and capital allowances, from the self-employment pages of the tax return (GOV.UK: expenses if you are self-employed). Lenders read it from the SA302 tax calculation and tax year overview, on the latest year, a two-year average or the lower of the two, depending on the lender. Every pound of expenses claimed lowers taxable profit, so it lowers the figure the lender reads by the same amount, and at 5 times income £1,000 of extra expenses removes £5,000 of borrowing. Our page on sole trader mortgages covers the readings and the expenses decision in full.

Partners and LLP members

Partners share the business's profits and each pays tax on their share (GOV.UK: business partnerships). The nominated partner looks after the partnership's own tax return, and each partner's share appears on their personal return. Members of an LLP are also taxed on their share of the profits and each registers for Self Assessment (GOV.UK: limited liability partnerships), so lenders assess them in the same way. The lender reads the borrower's own share from the tax calculation and the partnership accounts, so a 50% partner in a firm making £120,000 is assessed on £60,000. A recent change in the profit-sharing ratio, such as a first year as a partner, is usually explained with the partnership agreement or a letter from the firm. Our page on partnership mortgages covers new and changed shares, drawings and salaried LLP members.

Limited company directors

A director who owns enough of the company is assessed in one of two ways. One reads salary plus dividends drawn, from the tax calculations. The other reads salary plus the director's share of the company's profit after corporation tax, from the accounts, which counts profit retained in the company as well as profit drawn. For a director who leaves profit in the business the second can support a much larger loan, and some lenders use only the first. Shareholding decides whether the lender treats the director as self-employed at all. In our experience the lines differ: some lenders ignore shareholdings under 19%, some ignore holdings of 24% and below, and some do not underwrite shareholders who are not directors. Our page on mortgages for limited company directors sets out both methods and the shareholding rules, with company accounts and tax calculations as the starting evidence.

Contractors

A contractor on a day rate, whether through their own limited company, an umbrella company or as a sole trader, can be assessed on the contract by lenders with a contractor route, without waiting for accounts. The day rate is annualised: on our usual basis that is the day rate multiplied by 5 days and 48 weeks, although 46 weeks is the most common figure in lenders' published criteria. Lenders with a contractor mortgage route also check the contracting history, the time left on the current contract and any gaps, and they assess the pay as it reaches you, inside or outside IR35. Our contractor mortgages page covers the contract rules, and IT contractor mortgages covers short renewals and overseas clients. A worker on a fixed-term employment contract is an employee, covered on the fixed term contract mortgages page.

CIS subcontractors

Under the Construction Industry Scheme, contractors deduct 20% from a registered subcontractor's payments and 30% from an unregistered subcontractor's, and take nothing in advance where the subcontractor has gross payment status (GOV.UK: CIS for subcontractors). The deduction is worked out on the invoice total after taking out VAT, the materials the subcontractor paid for and some other costs, such as plant hire. It counts as an advance payment towards the subcontractor's tax and National Insurance (GOV.UK: making CIS deductions). A CIS subcontractor working as a sole trader is self-employed for tax, so lenders offering a CIS mortgage can read the income in three ways: gross statement pay annualised, the amount received after the deduction, or net profit from the tax calculation. Which one applies, and how many months of statements are needed, varies by lender. Our CIS mortgages page compares the readings.

Freelancers and gig workers

Freelancers, creatives and people working through online platforms are usually sole traders for tax, so lenders assess them on net profit in the same way. Income from several clients or platforms is added together on the tax calculation. A lender reads the annual figure, so an uneven monthly income matters less than the total, although bank statements are checked to see that the money arrives as the return says. Someone with a salaried job and self-employed work on the side can have both incomes counted, each on its own evidence, at lenders that accept a second income.

One year's figures or newly self-employed

Two years of figures gives the widest choice of lender. Some lenders accept one full year, more readily where the work continues an earlier employed role in the same field. A few consider less than a year, usually where a contractor can be assessed on a day rate or the borrower has moved from employment into the same trade. A first tax return that covers only part of a year is read differently from lender to lender, with some annualising it and others taking it as filed. Our one year self-employed mortgages page covers the trading history rules and the part-year return.

Self-employed with bad credit

Defaults, county court judgments, missed payments and tax arrears are assessed on their age, their size and whether they have been settled, alongside the business income. A recent or unpaid entry usually means a specialist lender, and in our experience adverse credit usually limits lending to around 90% loan to value. Tax owed to HMRC is disclosed on the application. HMRC may agree a payment plan where a tax bill cannot be paid in full (GOV.UK: if you cannot pay your tax bill on time), and how a lender treats tax owed under a plan, or arrears without one, varies. Our page on a remortgage for business purposes compares remortgaging to pay a tax bill with a payment plan. Our pages on CCJ mortgages and mortgages with defaults cover the credit side.

Self-employed buy to let

A buy to let mortgage is assessed mainly on the rent. Banks and building societies test the rent against the mortgage interest at a stressed rate under the Prudential Regulation Authority's buy to let underwriting standards (PRA: SS13/16), and other lenders set their own tests. Self-employed income comes in where a lender sets a minimum personal income, or where it lets personal income top up a rent that falls short. Most buy to let lending is not regulated by the FCA, and in our experience it goes up to 85% loan to value. The buy to let guide for self-employed borrowers covers the personal and company routes, and the buy to let mortgage guide covers the rent test.

How lenders assess self-employed income

Three decisions turn a self-employed borrower's records into a mortgage income: which figure the lender reads, which years it uses and what multiple it applies.

Which figure the lender reads

The figure depends on the structure: net profit for a sole trader, the profit share for a partner, salary plus dividends or salary plus a share of profit after corporation tax for a director, and the annualised day rate for a contractor. For a sole trader, partner or director the lender reads profit, or salary and dividends drawn from it, not turnover. A contractor's day rate and gross CIS pay are the exceptions: they are read before expenses, only by lenders with a route for them, and some lenders take an allowance for materials or expenses off CIS pay. Where a borrower has more than one source, such as a salary and a sole trade, each is read on its own evidence and the figures are added.

Which years it uses

The latest year suits a rising income, and a two-year average suits a steady one. Where profit has fallen, lenders generally use the lower, latest year, and a few average three years for trades with uneven results. One common reading is the two-year average or the latest year if lower, which takes the average when profit is rising and the latest year when it is falling. The method alone can move the loan by tens of thousands of pounds, so the shape of the income decides which lender to approach first.

What multiple it applies

Once the figure is settled, lenders generally apply the same income multiples to self-employed income as to employed income. In our experience 5 times income after credit commitments is the standard income multiple, up to 6 times for professionals and specialist products. Commitments come off the income first: £250 a month of car finance is £3,000 a year, which at 5 times removes £15,000 of borrowing. Lending at 4.5 times income or more counts towards the Bank of England's limit on high loan to income lending, which caps it at 15% of a lender's new mortgages. Since July 2025 individual lenders have been able to apply to the PRA or FCA to lend above 15% under interim arrangements. In April 2026 the PRA and FCA consulted on making that the rule, with lending across the market kept within 15%, and as at October 2026 the final rules had not been published (Bank of England: CP6/26). The lender's affordability assessment of outgoings at a stressed rate can bring any figure down.

When profit falls or jumps

A fall in profit is the hardest case. Lenders generally take the lower year as the new level, and some ask why it fell. Evidence that the fall was a one-off, such as current-year management accounts, Making Tax Digital updates or an accountant's letter, helps some lenders look past it. Our page on mortgages with decreasing profits sets out each type of fall and the evidence that explains it. A sharp rise can draw questions too, and a lender may average the two years to smooth it. Profit that falls year after year narrows the choice of lenders even when the latest figure is still high.

Self-employed mortgage documents

Lenders ask for documents that show the income and the money arriving in the bank. Most cases need some of the following, depending on the structure and the lender.

• HMRC tax calculations (SA302), printed from your HMRC online account or from the software used to file the return, and the matching tax year overviews from your HMRC online account, for one or two years. They can be printed 72 hours after the return is sent, and GOV.UK advises checking that your lender accepts copies you print yourself (GOV.UK: get your SA302 tax calculation).
• Company or partnership accounts, for a director assessed on a share of profit or a partner whose share needs to be shown.
• Confirmation of your shareholding and directorship, for a company director, since the shareholding decides whether a lender treats you as self-employed.
• An accountant's certificate or reference, at lenders that ask for one. Some lenders want the accounts prepared by a qualified accountant.
• The current contract and earlier contracts, for a contractor assessed on a day rate.
• CIS payment and deduction statements, which contractors must give within 14 days of the end of each tax month.
• Business and personal bank statements, for the months the lender asks for.
• Current-year figures, such as management accounts or Making Tax Digital quarterly updates, where the last return is old or the income has changed since.
• Proof of identity, address and the deposit, as on any application.

Incomplete or mismatched documents are a common cause of delay. The tax calculation, the accounts and the bank statements should tell the same story, and a difference such as transition profit from basis period reform or a one-off sale of equipment is easier to explain before the underwriter asks. Our page on a mortgage declined at underwriting covers how underwriters read documents that do not match.

Why self-employed mortgage applications are declined

Many self-employed declines come from applying to a lender whose income method does not suit the business. A director with retained profit who applies to a lender that reads only dividends, or a sole trader whose profit fell in the latest year applying to a lender that takes that year, can be turned down on figures another lender would accept. Applying before the latest return is filed, or with figures that do not match between documents, accounts for many of the rest. Each full application usually leaves a search on the credit file, so the lender is worth choosing before the first application.

Our declined mortgages page covers what to do after a decline, and mortgage declined on affordability covers the income side, including self-employed income averaged over a weaker year.

Tax changes lenders now see

Recent tax changes alter the figures on self-employed and director tax records, and a lender reading them needs to know which numbers moved and why. Mortgage Lane does not give tax advice. GOV.UK publishes the rules, and an accountant or tax adviser can say how a change affects your own figures.

Making Tax Digital for Income Tax

Making Tax Digital for Income Tax applies to sole traders and landlords registered for Self Assessment whose qualifying income is above a threshold. Those with qualifying income over £50,000 in 2024 to 2025 had to start from 6 April 2026. The threshold falls to £30,000 from 6 April 2027, based on 2025 to 2026 income, and to £20,000 from 6 April 2028, based on 2026 to 2027 income (GOV.UK: check if you are eligible for Making Tax Digital for Income Tax). Qualifying income is turnover from self-employment and property before expenses, so a sole trader with a modest profit can be inside the scheme. Employment income, dividends and a partner's share of partnership profit do not count towards it, and partnerships are not yet included (GOV.UK: work out your qualifying income).

Those in the scheme keep digital records and send HMRC a quarterly update through compatible software, by 7 August, 7 November, 7 February and 7 May. Each update is cumulative from the start of the tax year and gives totals for each category of income and expense (GOV.UK: send quarterly updates). A tax return still follows at the end of the year. For a mortgage, the quarterly updates are current-year figures that can support an application when the last return is old or the income has changed. Lenders still assess the annual tax calculation, and whether a lender takes quarterly figures into account is its own decision.

Basis period reform

From the 2024 to 2025 tax year, sole traders and partners are taxed on the profit arising in the tax year itself, whatever their accounting date. Businesses whose accounts ran to a date other than 31 March or 5 April had a transition year in 2023 to 2024. By default the extra transition profit is spread over five tax years: 20% in each of 2023 to 2024, 2024 to 2025, 2025 to 2026 and 2026 to 2027, and the balance in 2027 to 2028. A trader can elect to bring more of it forward (HMRC Business Income Manual: BIM81310). That spread adds to taxable profit on the tax calculations for those years without being new trading profit, so a tax calculation can show more profit than the business made in the year. A lender reading it may need the accounts or an accountant's letter to separate the two.

Dividend tax from April 2026

From 6 April 2026, dividends above the £500 allowance are taxed at 10.75% in the basic rate band and 35.75% in the higher rate band, up from 8.75% and 33.75%, and the additional rate stays at 39.35% (GOV.UK: tax on dividends; GOV.UK: changes to tax rates for dividend income). A director who draws the same dividend keeps less of it, and a director who draws less to manage the tax lowers the figure a salary and dividends lender reads. The share of profit method does not depend on what the director draws.

Corporation tax

Company profit is taxed at 19% where it is £50,000 or less and at 25% above £250,000, with marginal relief between the two. The limits are reduced for short accounting periods and for associated companies, and the rates are the same for the financial years starting 1 April 2023 to 1 April 2026 (GOV.UK: Corporation Tax rates and allowances). A lender using the share of profit method reads profit after this tax, so the company's rate band feeds straight into the director's assessed income.

Scotland

A Scottish taxpayer pays Scottish Income Tax on salary and trading profit, in six bands from 19% to 48% for 2026 to 2027, while dividends and savings interest are taxed at the UK rates (GOV.UK: Scottish Income Tax). Lenders generally assess gross income, so the Scottish bands change take-home pay more than the assessed figure, although an affordability check on net income can reflect them. Corporation tax, the Construction Industry Scheme and Making Tax Digital apply in the same way across the UK. Our mortgages in Scotland page covers buying under Scottish law, from the Home Report to Land and Buildings Transaction Tax.

How a self-employed mortgage is arranged

1. Structure and income review. How the business is set up and how you are paid, with the income worked out on each lender method that applies, from your tax calculations, accounts, contract or CIS statements.
2. Lender match. The lender chosen first for an income method and a trading history rule that fit, then for its loan to value limit and its pricing, with the length of any fixed rate chosen around the timing of the next tax return.
3. Agreement in principle. An agreement in principle from that lender, with the income declared on the method it uses.
4. Application and evidence. Tax calculations, tax year overviews, accounts, contracts and bank statements sent with the full application, and the lender's valuation of the property.
5. Underwriting questions. Answers on any change in income, retained profit, transition profit or tax owed, with your accountant's help where the question is about the accounts.
6. Offer and completion. The lender's mortgage offer, then completion.

Sole traders and partners have no employer to pay sick pay or a death-in-service benefit, and our insurance pages explain the cover available.

Same work, different structures: how much each can borrow

Five self-employed people with similar earnings can present five different incomes to a lender, and the structure sets the figure.

Step 1. The figure each lender reads

The five borrowers are illustrative. A is a sole trader with net profit of £60,000 in the latest year and £54,000 the year before. B is a 50% partner in a firm making £120,000. C is the sole director and shareholder of a company that made £100,000 before the director's pay. After a £12,570 salary the company's profit was £87,430, corporation tax at 25% less marginal relief took £19,419, and C drew £40,000 of the £68,011 left as dividends; employer National Insurance is left out to keep the arithmetic clear. D is a contractor on £300 a day. E is a CIS subcontractor paid an average of £1,100 a week for labour, before the 20% deduction. None has other credit commitments, and the multiple is 5 times, the standard on the cases we arrange.

The director's two rows are £140,055 apart on the same accounts, the widest gap in the table. A contractor annualised over 46 weeks, the most common figure in lenders' published criteria, would read £69,000 and reach £345,000. A lender reading E's pay after the 20% deduction would start from £42,240 (£880 a week over 48 weeks), which supports £211,200, and one reading the tax calculation would use E's net profit after expenses, as for a sole trader.

Step 2. Against a £300,000 purchase

Each borrower wants a £300,000 home with a £30,000 deposit, a loan of £270,000 at 90% loan to value. Over 30 years at 5.2%, the illustrative rate used across our guides and not a product rate, the payment is £1,482.60 a month.

On identical accounts, the director can buy the home with a lender that counts the share of profit and cannot with one that reads only salary and dividends. The CIS subcontractor is £6,000 short on a gross reading, which a £36,000 deposit would close, and a lender reading pay after the deduction would leave a much larger gap.

Step 3. What moves the figure

If A's profit had fallen instead, from £60,000 to £50,000, the two-year average would be £55,000 and the latest year £50,000. A lender taking the lower of the two reads £50,000 and lends up to £250,000, £20,000 short of the £270,000 loan. In Step 1, where profit rose from £54,000 to £60,000, the same rule took the £57,000 average and gave £285,000, because a rising income takes the average and a falling one takes the latest year.

Credit commitments come off every reading in the same way. If C also paid £250 a month on car finance, £3,000 a year would come off the income before the multiple, and the salary and dividends reading would fall from £262,850 to £247,850. At 6 times, the top of the range for professionals and specialist products in our experience, A's latest year of £60,000 would support £360,000.

What decides the case

By the time you apply, the structure and the past figures are fixed. You can still choose the lender, and with it the method and the years it reads, as well as the size of the deposit and when to apply, for example once a stronger return has been filed. Our approach is to work out the income on every method that applies to your structure, then choose the lender whose method fits what the business earns. The calculator below runs each reading on your own figures.