Self employed mortgages in the UK
Why two years of accounts is common but one year can still work

Getting a mortgage when you are self-employed can feel confusing. You will hear different rules from different people. Some say you must have two years of accounts. Others say one year is enough. Some say retained profit helps. Others say it does not.

Here is the simple truth in plain English.

How lenders see self-employed people

Lenders classify you as self-employed if you are a
sole trader
partner in a business
A director who owns part of a limited company

So even if you take a small salary and top it up with dividends, a lender will usually treat you as self-employed.

Lenders are not against self-employed borrowers. They just want to understand how steady your income is.

Why most lenders want two years of accounts

Most high street lenders ask for two years of accounts or two years of SA302 tax forms.
This is because two years shows a pattern. They can see if your income is steady or changing.

If you are a sole trader they look at your net profit.
If you are a company director, they look at your salary and your dividends. Some average the last two years. Some use the latest year if it is lower.

This is why so many people search online for two years accounts mortgage. It gives you more choice and often better rates.

When one year of accounts is enough

Some lenders may still accept one year of trading.
This is more common with specialist lenders who are used to new businesses.

They look for
a strong first year
experience in the same field
clean bank statements
a clear business story

Lenders who often help with one-year cases include Kensington, Aldermore, Bluestone, Precise and Pepper.

Rates can be a little higher, but it lets people buy sooner without waiting another full year.

This is why the phrase “one-year accounts mortgage UK” has become a popular search term.

Do not increase your drawings to look good- youre tax bill sore and staging income is not the way to do it ! 

Many people try to pay themselves more just before applying for a mortgage. They think it will help them borrow more. This often causes problems.

It can give you a large tax bill
It can make the income look false
It can cause trouble if the next year drops again

You do not always need to show a high personal income.
Some lenders will look at the whole business.
Some will look at retained profit.
Some will look at salary, dividends and profit together.

This is why the phrase retained profit mortgage is now well known.

Why retained profit helps some company directors

If you keep money inside your company for tax reasons, you may think you look like you earn very little. That is not always true in a mortgage application.

Some lenders will use
company net profit
profit after tax
a share of retained profit
salary and dividends combined with profit

This gives a fairer picture of your actual income and avoids taking out money you do not need.

Lenders under Consumer Duty

Consumer Duty says lenders and advisers must treat people fairly. That includes self-employed borrowers.

This means lenders must
explain things clearly
use fair checks
avoid unrealistic lending
look at your real income and real situation

You should never be pushed into taking high drawings or changing your business just to pass a test. Your business and your mortgage must both be safe for the long term.

The smart way to plan a self-employed mortgage

If you want a mortgage in the next year, speak to a broker before your year-end.
This gives time to plan with your accountant and avoid last-minute changes that cause problems.

Planning early helps you
keep your tax bill under control
show clear income
pick a lender who understands your type of business

Most people do best with two years of accounts.
Some can buy with one strong year.
It depends on your business and the lender that fits you.

The simple message

Two years of accounts gives the widest choice
One year can still be accepted
Some lenders can use retained profit
Your drawings do not need to be forced up
Your business story matters more than one number

At Highfields, we look at your accounts, your tax position and your plans. We match you with lenders that understand self employed income. Everything is explained in clear simple language.

Your home or property may be repossessed if repayments on a mortgage or loan secured on it are not made.

This post is for information only and is not advice.
Every applicant is different and should get tailored guidance.