Self-Employed Net Profit Mortgage
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Self-Employed Net Profit Mortgage
Joe Capon explains how using net profit as income works when applying for a mortgage.
Podcast approved by The Openwork Partnership on 29/12/2025.
How do you calculate affordability when using net profit as income?
For the self-employed, there are a few different ways affordability can be calculated. It also comes down to how long you’ve been self-employed for.
If you’ve been self-employed for a few years, lenders look at the net profit on your tax returns. If it’s increased year on year, they usually take an average of the last two years, but a few will just look at the latest year.
If the last two years are really healthy, that opens up a lot of mortgage options, but products are also available if you’ve been self-employed for less than two years. We can just use your net profit on the tax return for the first year.
That would limit the lenders, however. If you want to maximise your borrowing, having two years’ records will open up more doors, depending on the circumstances.
Another scenario is where someone has been self-employed for a couple of years, and their first year was higher than their second year – so the income has dropped. Some lenders would ignore the higher year and purely look at the latest year.
How many years of net profit figures do I need to apply for a mortgage?
Again, having at least two years’ tax returns will give you the most choice, and will help you get where you want to be.
If you’ve only been self-employed for one year, though, a few options are still available. So, the minimum is one year.
Do lenders use average net profit, the most recent year or over two or more years?
It’s going to come down to how long you’ve been self-employed. Generally, if you’ve been self-employed for a year, a lender only has one tax return to look at for your net profit.
Once you’ve been self-employed for two years or more, there are more options. As an example, you might have a net profit of £30,000 in the first year and £50,000 the second year. Some lenders will take an average and use £40,000 as that income.
But to maximise affordability, there are certain lenders who will ignore the previous year and purely look at that £50,000. We would need to understand and explain that increase, as the lender will want to know that it’s acceptable and sustainable.
On the flip side, perhaps the profit was £50,000 the first year, and then decreased to £30,000. A lender will usually use the worst case scenario and take the £30,000.
These scenarios can be complex. So if you’re not sure, seek the advice of a mortgage broker. We will put together a plan and explain all your different options.
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How does my net profit affect the maximum mortgage I can get?
Whether someone is self-employed or employed, the income on their tax returns, company accounts or payslips is the starting point. But their credit commitments like personal loans, car finance, credit card balances and dependants are factored in too.
The net profit declared on your tax returns will therefore affect how much you can borrow. If it’s not properly recorded, or you’ve offset a lot of expenses against profit to reduce the tax bill, this will have a negative affect on affordability.
Can I get different income multipliers based on net profit when applying for a mortgage? Do lenders apply a lower income multiple for self-employed applicants?
Some lenders do reduce the income multiples for self-employed individuals and might offer up to 4.5 times your self-employed income.
But if you meet the minimum income threshold and have a certain deposit amount, some lenders will give you five times your income.
Obviously this is based on the market today, as we record this in December 2025. Things could change but not every lender will restrict you to a lower income multiple. It’s just tailored around that income.
This is probably where it’s even more important to seek professional mortgage advice. Your adviser will look at your income, deposit and whether you’re a sole trader or a limited company director. We then set out your maximum borrowing with certain lenders. We normally see a massive difference in how much each lender can lend.
Can you use projected income to get a mortgage?
You can, but the number of lenders that allow this are very limited and you would need an accountant. It won’t work if you submit your own tax returns, because a lender will seek confirmation of that projection from your accountant.
This is obviously a very complex area, so I’d always advise speaking to a mortgage adviser if you think this could benefit you.
Using a projection, you would need to have been self-employed for longer than two years. The lender needs to see a track history alongside that accountant’s reference or projection letter.
Your mortgage adviser will look at all the information, speak to the accountant and then paint a picture of what’s possible for that individual.
Is there a maximum Loan to Income ratio when using net profit?
Yes, there will be, and again, this is lender-dependent. The maximum income multiple is up to six times the net profit on your tax returns. One lender’s minimum income threshold to qualify for that is £75,000 per year. You would need to evidence the last two years’ net profits, and for the average to be over £75,000.
If net profits have decreased from year to year, the latest year would need to be at least £75,000. In addition, the deposit required is 15% or more. Again, that’s the case today in December 2025 and could change in the future.
Other lenders offer up to five times your income, with a minimum threshold of £40,000 – which can be a joint income. The deposit there needs to be 10% of the purchase price and you would need to meet criteria around commitments and credit scoring.
Are there any minimum income thresholds for self-employed applicants?
Yes, and we just touched on this. One lender has a minimum income threshold of £40,000 which can be single or joint income. If you’ve got a 10% deposit you can get an increased income multiple with this lender.
Generally, if the income multiple doesn’t matter too much, the minimum deposit for most clients is 5% and there’s no minimum income. It’s more about deposit than anything else for self-employed applicants.
Are there different requirements for sole traders versus limited company directors?
There can be, depending on the lender. Probably the main difference is the documentation requirements. A sole trader would need to provide the latest two years’ tax returns – or just the latest year if that’s all they have. They also need a tax year overview to go with each tax return, which you can get from your accountant or the HMRC portal.
A limited company director again needs tax returns and tax year overviews for the last two years – or one year, if necessary. Some lenders will also want to see the company accounts.
Because limited company directors are paid in salary and dividends, we also check that the profit of the company allows for that dividend income, and that everything matches up.
If I operate under multiple businesses, how do you assess total income?
Again, it depends whether you’re a sole trader or a limited company. For a sole trader, the profit from each business or occupation will build up a total net profit on your tax return. The lender will just use that total.
Again, it depends how long you’ve been self-employed. If it’s one year, they’ll use the total net profit of that year. If it’s two years, and your net profit has increased from one year to the other, they may take an average. Or, the latest year could be used, on a case by case basis.
If net profit has decreased, the lender will take the latest year as a worst case scenario.
For a limited company director, lenders look at your personal tax returns to view your salary and dividend income. They also look at the accounts for each company to ensure they are showing a profit.
How can a mortgage broker help here?
If you’re self-employed, a mortgage broker can be vital. We’re here to help you find the right options.
We will help you save time and potentially money as well, by finding the right mortgage product and ensuring you know exactly how much you can borrow. Our advice could help you buy a property you love, rather than settle for something less than perfect.
Key Takeaways:
- For self-employed individuals with two or more years of history, lenders calculate affordability by taking an average of the last two years (if profit has increased) or the latest/lowest year (if profit has decreased).
- While some options are available with just one year of self-employment history, having at least two years of tax returns provides a greater choice of lenders and the best chance to maximise your borrowing potential.
- The maximum Loan to Income ratio is lender-dependent, with options ranging from up to 4.5 times income to as high as six times your net profit.
- Reducing your tax bill by offsetting a significant amount of expenses against your profit will have a negative effect on your mortgage affordability, as lenders calculate your income based on the declared net profit.
- Due to the complexity and variation in how much different lenders can offer, seeking the advice of a professional mortgage broker is highly recommended.
YOUR PROPERTY MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.
Approved by The Openwork Partnership on 29/12/2025.