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Self-employed mortgages can sometimes get a bad name. There’s a lingering perception that they’re difficult to obtain, wrapped in red tape, and full of hoops to jump through. And while there’s some truth that they can be a bit more involved than a standard PAYE mortgage, we think the reputation is a little unfair, especially regarding limited company directors.
In this article, we’ll unpack the myths, explain what’s required, and help you understand what you can do to give yourself the best chance of success if you’re a company director applying for a mortgage. One of the most common misconceptions we hear is that you need to have at least three years of self-employed accounts, and while that used to be true across the board, it’s simply not the case anymore. Many lenders are happy with two years; some will consider just one, and it’s possible to apply with even less in a few specific cases.
Can You Get a Mortgage With Just One Year of Accounts?
The short answer is yes, getting a mortgage with just one year of trading history as a limited company director is possible. But as you’d expect, the context matters. Lenders want to understand the bigger picture. If you’ve recently become self-employed but have years of experience in the same field, that’s a very different proposition from someone who’s just started in a new industry.
For example, you’ve been an employed electrician for ten years and set up your limited company; in that case, some lenders will see that as a natural career progression and feel comfortable lending based on one year of accounts. If you’ve gone from being a chef to launching a property development company, lenders will likely view that as higher risk and will usually want to see a longer track record before they’re prepared to lend.
The key is that lenders are trying to assess sustainability and consistency. If you can demonstrate a strong foundation, a solid income, and good, sound finances, there’s a strong chance you’ll be in the running, even with just a single year of accounts behind you.
Less Than a Year: Is It Ever Possible?
In rare cases, yes, particularly if you’ve moved from a sole trader to a limited company. Many lenders view this as a change in tax structure rather than the start of a brand-new business. Some lenders may accept your sole trader history alongside your newly formed company accounts if you can show continuity of income, a consistent client base, or ongoing contracts.
Likewise, in specific fields like IT contracting or construction (via the CIS scheme), some lenders are more flexible due to the nature of the work. These sectors often involve fixed-term contracts with regular income, so lenders are more comfortable assessing affordability even without years of self-employed history.
It’s certainly not the norm, but it’s not impossible either. Properly presenting your case can make a big difference, which is where a good mortgage broker earns their keep.
How Ownership Affects Your Application
One point that often gets overlooked is the impact of company ownership on how you’re assessed. If you own less than 20–25% of a limited company, most lenders will treat you as an employee, meaning you’ll usually only need to provide your payslips and P60 like any other PAYE applicant. That can make things a lot simpler.
But once your ownership rises above that 20–25% threshold, you’re typically treated as self-employed, and the underwriting becomes more detailed. You’ll usually need to provide full company accounts, SA302s, tax year overviews, and possibly accountant references. The more control you have over the business, the more interest lenders take in its performance.
How Lenders Assess Income
This is where things can get a little more complicated. As a limited company director, how you draw income can vary widely. You may take a modest salary and top it up with dividends or leave money in the company to reduce your tax liability. From a financial planning perspective, that’s often a very sensible approach. But from a mortgage perspective, it can sometimes work against you.
Some lenders will only consider what you’ve drawn from the business, i.e., your salary and dividends. If you’ve chosen to retain profits in the company, that could significantly reduce the income they use for affordability. In other words, even if your business is doing exceptionally well, your borrowing capacity might be limited if you’ve kept your income low.
Fortunately, not all lenders think this way. Some will take a broader view and look at the company’s net profit, especially if you’re the sole or majority shareholder. This approach can make a massive difference to your borrowing potential. For example, if you take £30,000 per year in salary and dividends but the company makes £100,000 profit, a lender who considers profit could assess you on a much higher income, bringing your affordability more in line with what you can afford.
Profit vs Turnover: Why It Matters
One of the most common pitfalls we see is business owners focusing too much on turnover and not enough on profit. It’s important to remember that turnover is your top-line income, which comes into the business. But what matters to lenders is what’s left at the end of the day, your profit. Or, as we sometimes put it: turnover is for show, profit is for dough.
If your company has high turnover but low profit, perhaps because you’ve reinvested heavily or managed your expenses to reduce your tax bill, lenders might see that as a red flag. That doesn’t mean you’ve done anything wrong, but it does highlight the importance of speaking to a broker early and possibly working with your accountant to make your business more mortgage-friendly in the year or two before you apply.
One Year vs Two or Three Years of Accounts
Although one year is sometimes enough, most lenders still prefer to see at least two years of accounts, and they will usually average the figures over that period. If your income is growing, some will use the latest year alone. But if your income is declining, lenders are more cautious. Depending on their policy, many will take the lower figure or average the two.
Three years of accounts used to be the standard requirement, but that’s increasingly rare now, especially if the business is stable and your case is well-packaged.
Work With a Broker Early
We mortgage brokers don’t just tick boxes and send off forms. Our job is to understand your situation, explain it clearly to the lender, and match you with the ones most likely to say yes.
Every lender has different criteria, appetites for risk, and ways of assessing affordability. A good broker can present your case in the best light, help you decide how to draw income in a way that supports your goals, and flag any potential issues before they become a problem.
If you’re a limited company director planning to apply for a mortgage, whether now or in a year, the best advice we can give you is to start early, speak to a broker, such as Strive Mortgages or The Mortgage Pod, and make a plan.
By Jamie Elvin, director of Strive Mortgages, and Steve Humphrey, founder of The Mortgage Pod.
Reviewed and edited by Albert Fang.
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Article Title: Mortgages for Limited Company Directors: What You Need to Know
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