How lenders think about income
Unlike a salaried applicant with payslips, you’re asking a lender to trust a picture built from accounts, tax returns and bank behaviour. Most will work from your share of net profit (or salary plus dividends if you’re a director) after tax — not turnover, and not what’s left in the business account if you haven’t declared it.
They usually want a track record: often two years of accounts or SA302s, sometimes one year with a strong story. A sudden spike or drop in profit will get questions; consistency and clarity win.
What to have ready
Typically: SA302s / tax year overviews and tax calculations, full accounts or accountant’s certificates, business bank statements, and personal bank statements. If you’re a limited company, know your salary vs dividends and what profit you’ve retained — some lenders use retained profit; others won’t touch it.
An accountant who understands mortgage underwriting is worth their fee. The way figures are presented on a tax return can help or hurt you.
Retained profits and “my business can afford it”
This trips people up constantly. You might have six figures sitting in the company — but if only a modest salary and dividends show on your tax return, many high-street lenders only lend on what’s been taken as income. Specialist lenders exist for those who need affordability based on share of profit or retained earnings. That’s where a whole-of-market search matters.
Common pitfalls
Changing your accounting year-end right before an application. Large one-off expenses that depress profit on paper. Mixing personal and business spending on the same card. Taking a mortgage payment holiday during Covid without understanding how it reads on your file. Taking new credit just before you apply. None of these are necessarily fatal — but they all need explaining in the right order.
What I do differently
I match your actual income story to lenders who underwrite that way — not the other way round. If you’re self-employed and you’ve been told “computer says no,” get a second look before you give up.
This guide is general information, not personal advice. For a view on what you could borrow, start a fact find and we’ll go from there.