for the Self Employed

This blog is a Guest Blog by Andrew Mills, of Andrew Mills Financial Services. He is a Mortgage Consultant based in Bury St Edmund's in Suffolk and runs his own business supporting clients across the country in getting the correct mortgage solution for them.

We sat down with him to get his Top Tips for those who are self-employed and wanting to secure a mortgage. It is not always easy to secure a mortgage in these circumstances without providing the evidence the lenders require, and especially if you have only recently become self-employed.

But with these Top Tips, and Andrew's support if you require it, AskJoanna can help equip you in securing your mortgage and buying your dream home.   

Self-employed status

You will be considered self-employed if you are a sole trader, or in partnership, or a director of limited company.

Most lenders consider someone that owns 25% or more of a limited company (i.e. a shareholding of more than 25%) to have self-employed status, although this can vary from provider to provider with some lenders having a lower or higher threshold.



 Plan ahead

Most lenders require 2 full years of self-employment before they will consider an application. There are a small number of providers that will consider only one full year but you would have a greater breadth of lending options on the basis of 2 years. This means that, dependent on your situation, you may have to hold off applying for a mortgage until you have a sufficient amount of financial evidence and can demonstrate your self-employment effectively.


Key Financial Evidence

Sole traders or partnerships

Lenders typically base the lending on historic net profits, using an average across the period, or the latest year depending on the trajectory of the profits. In the event of a decreasing trend, it's likely that the lender will work from the most recent years profit as opposed to an average, although this will depend on the lender's criteria. In the event of an increasing trend, it's more likely that the lender will use an average across the 2 years.

If you had a bad year for profits, it is worth gathering some evidence to explain any mitigating factors that may have influenced that, such as investment into the business. It may also be beneficial to evidence a trend of increasing profits, and good forecasted profits in the current, ongoing financial year, as this may be required to support your mortgage application.

Limited companies

The majority of lenders base the lending on historic salary and dividend drawings as reported in your personal tax return for the most recent 2 years. 

There are some lenders however that will also consider, or instead, use the company's profits to assess the eligibility for lending. This can be advantageous to Directors who leave retained profits in their business in order to reduce their tax personal tax liabilities. It is a difficult balance to achieve but one worth knowing/thinking about.

Take Advice

It is well worth taking advice from a Mortgage Adviser both before you consider buying a property and at the time you are ready to start a mortgage application. The Mortgage Adviser will give you specific guidance on the things you need to consider in your personal situation and what you should start preparing to strengthen your position.

You can take this guidance as necessary to your Accountant who can help you to start preparing your accounts mindful of the fact you intend to apply for a mortgage either now or later on down the line.

If you don't have an Accountant it would be beneficial to get one. In some cases, lenders may request supplementary information to support a mortgage application, such as an Accountant's reference or guidance on likely sustainability of profits in the future. An Accountant can also provide all of the other documents you may require (see below) such as tax year overviews and SA302 documents which otherwise can be quite difficult to locate through the HMRC website on your own!



Preparing your financial information

Once you are ready to make a mortgage application, come prepared for your meeting with your Mortgage Adviser:

Gather your most recent 2 years tax returns, if available, and ensure your most recent accounts and tax return have been completed within the last 18 months

Gather your business bank statements for the most recent 3 months to verify that you and/or your company is still operating at a similar level of trading to that illustrated in your accounts. Not all providers require this but in recent times, it's becoming more common for lenders to take a snapshot of current trading performance.

Download from your HMRC/Self Assessment account an “SA302”, also referred to as a “personal tax calculation” and corresponding tax year overviews for the last two years, or ask your Accountant to do so for you. This is a shortened version of the full tax return which confirms your net profit and/or salary and dividend drawings in the case of a limited company director.

The actual documents you will require may vary, dependent on your situation. An initial chat with a Mortgage Adviser would enable you to identify those items that would be required.

If you would like AskJoanna to introduce you to Andrew Mills so that you can take detailed mortgage advice,

Contact Us and we will connect you.  

LASTLY, THE LEGAL BIT! As with all mortgage advice it comes with a reminder:


Andrew Mills Financial Services Ltd is an appointed representative of PRIMIS Mortgage Network, a trading name of Advance Mortgage Funding Limited. Advance Mortgage Funding Limited is authorised and regulated by the Financial Conduct Authority.

The guidance and/or information contained is subject to UK regulatory regime and is therefore targeted at consumers based in the UK.

Registered office address – 8 Highbury Road, Bury St. Edmunds, Suffolk, IP33 3QB

Registration number –  08929852. Registered in England and Wales