Self-Employed? January is tax return time!

Jan 11, 2022

If you’re self-employed then you have until the end of January to submit your online return. It’s often this time of year that self-employed people start wondering what they might be able to borrow on a mortgage. Particularly if their tax return is better this year than last year.

We thought it would therefore be a good time to publish an article which briefly explains how mortgage lenders will interpret your income.

Sole Traders-

The majority of lenders will take the last average of the last two years net profit figure as your income. If your net profit has reduced, they’ll typically take the most recent year only.  If your most recent year is considerably higher than the year before, don’t panic! There are lenders that will take just the most recent year for their calculation, you’ll likely be able to borrow much more with these lenders. They are however off of the Highstreet and you should expect a higher interest rate as a result.

Limited company directors-

If you’re a company director or your shareholding in a limited company is greater than 25% then you will be considered Self-Employed by the majority of lenders. Again, your income is typically calculated by taking the average of the last two years where the income has been generally stable. The income that lenders consider is your salary plus your dividends, both are considered at 100% it doesn’t matter if the salary is very low and the dividends are high or vice-verse.

If you think the above means that you aren’t being treated fairly from a lending perspective then don’t worry! We have access to lenders which will use your share of the net profit in the business rather than your dividends, this can be of huge value as you may not have taken much in dividends for tax reasons or simply because you re-invested in the business.  There are mainstream lenders that can work this way so you’re still potentially looking at low rates.

What about Covid support?

SEISS – If you took a SEISS grant, then we can help. Each lender has their own policy when it comes to the use of grants so it’s important to speak to an adviser if you have needed support during the pandemic.

CBILS/Bounce-back – These loans are now better understood, and the market is generally better set up to handle enquires from businesses which have taken the loans. Generally speaking, many of our clients have taken the loan but not needed it, if this is the case then it’s not likely to have a negative impact on your ability to borrow.

If your business was impacted by the pandemic it’s essential that you speak to an adviser regarding your mortgage options.

We know this is very brief but hopefully it’s given you some confidence with your borrowing ability. Please do get in touch with us if you are self employed and have any questions at all about mortgages.

Steven Morris – Advising Director



Steve loves a complex mortgage. Most recently he has used his technical geekery to work his way up through Which? Mortgage Advisers, progressing to Senior Adviser and then Onboarding Manager. There, he was responsible for hiring, training and managing new advisers.

He also ran the monthly new starter inductions and wrote and maintained the telephony advice standards of the company. Outside of work Steve can be found coaching and being run ragged by his local under 10’s rugby team, Bristol Harlequins RFC.

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