Lenders usually work out a company director's income in one of two ways: salary plus dividends, or salary plus your share of the company's net profit. Most want two years of trading history and some will accept one. The method a lender uses can change how much you can borrow by a wide margin, especially if you leave profit in the company rather than drawing it.
How do lenders work out a director's income?
If you are employed, a lender looks at your payslips. If you own your company, your income is whatever you choose to take, which is why lenders look more closely. There are two main methods.
Salary plus dividends. This is the most common approach. The lender adds your salary to the dividends you have drawn. Many use the latest year or an average of the last two years, whichever is lower, so a dip in one year can pull the figure down.
Salary plus share of net profit. Some lenders look at the profit the company made after corporation tax, then credit you with your share of it, whether or not you drew it out. This is usually offered to directors who own a significant share of the company, and the shareholding each lender requires varies.
Here is how far apart the two methods can be, using an illustrative income multiple of 4.5 times. Real multiples and affordability checks vary by lender and by applicant.
Example
A director owns 100% of the company, takes a salary of £12,570 and draws £40,000 in dividends. The company makes £90,000 of net profit after corporation tax.
- Salary plus dividends: £52,570 of income, which at 4.5 times suggests borrowing of around £236,500
- Salary plus share of net profit: £102,570 of income, which at 4.5 times suggests borrowing of around £461,500
You can use our mortgage repayment calculator to see what different loan sizes would cost each month.
How many years of accounts do I need?
Most lenders want to see two years of trading, and some will lend on one full year of accounts. If you moved from being a sole trader to a limited company doing the same work, some lenders will count your trading history before incorporation. With less history, there are fewer lenders to choose from and the terms may be less favourable, so it pays to know which lenders to approach before applying.
What documents will I need?
Having these ready makes the process quicker:
- SA302 tax calculations and matching tax year overviews from HMRC, usually for the last two years
- your company's full accounts for the same period
- an accountant's certificate or reference, which some lenders accept in place of other evidence
- recent personal and business bank statements
- proof of identity, address and deposit
- details of your existing credit commitments
Can retained profits or pension contributions affect my mortgage?
Yes, in both directions. Profit kept in the company only helps with lenders who use the net profit method. With a salary and dividends lender, it does not count.
Large employer pension contributions are often a sensible way to take money out of the business, but they reduce the company's profit. In the year before a mortgage application, that can lower the income figure a net profit lender uses. Lower dividends can do the same with a salary and dividends lender. Where possible, plan 12 to 24 months ahead with your accountant, so your tax planning and your mortgage plans work together rather than against each other.
Does using a broker help?
Our mortgage advice covers the whole of market, excluding deals that are only available by going direct to a lender. Knowing which lenders use which method, and how each treats retained profit, a recent drop in income or a newer company, saves time and avoids unnecessary applications. Each full application usually leaves a search on your credit file.
Because we also look after financial planning and protection, we can see how your mortgage fits with your pension, your tax position and the cover your family would need. Once your mortgage is in place, our overpayment calculator shows how extra payments could shorten the term.
Frequently asked questions
Can I get a mortgage as a director with one year of accounts?
Yes, some lenders will lend with one full year of accounts, although the choice of lenders is narrower than with two years.
Do mortgage lenders count retained profits?
Some do. Lenders that assess your share of the company's net profit after corporation tax will include profit kept in the business. Lenders that use salary plus dividends will not.
What is an SA302?
An SA302 is HMRC's tax calculation for a tax year, produced from your self assessment return. Lenders usually ask for it alongside the matching tax year overview.
Do dividends count as income for a mortgage?
Yes. Most lenders count dividends, usually alongside your salary, and many use an average of the last two years.
Start with a conversation
If any of this sounds like your situation, start with a conversation. Call the office on 020 3751 5680, email office@lucro.co.uk or book a time at lucro.co.uk/contact. We will look at the whole picture, your business, your family and your plans, and tell you plainly what we think.
Important
Your home may be repossessed if you do not keep up repayments on your mortgage.
There may be a fee for mortgage advice. The amount depends on your circumstances and we will confirm it before any work starts.
This article is for general information and is not personal advice. Lending criteria vary between lenders and change over time. Any mortgage is subject to the lender's assessment of your circumstances.
Approver Quilter Financial Services Ltd. October 2026