Can You Get a Mortgage Using Net Profit if You’re Self-Employed? (2026 Guide)
- Ben Stephenson
- 6 days ago
- 11 min read
Updated: 5 days ago
Yes, many lenders can use net profit, if your evidence is strong.
We are FCA authorised (496907) • 25+ years’ experience • Highly Reviewed (4.9★) on Google
Key points
Net profit is often the starting income figure.
Lenders usually want 2 years’ proof.
One year can work with strong compensating factors.
Limited company income rules vary widely.
Retained profits may help, evidence matters.
If you are self-employed, a mortgage lender will usually want to see income that is stable, provable, and sustainable. For many applicants, that means affordability is calculated from net profit (sole traders and partnerships) or from a combination of salary, dividends, and sometimes company profits (limited company directors).
In practice, your “best case” is not always your “most tax-efficient case”. If you have legitimately reduced your taxable profit through expenses, that can also reduce the income figure used for affordability. This is one of the most common surprises we see, especially where people assume lenders will look at turnover or bank credits instead of taxable profit.
In 2026, lenders are still expected to apply affordability stress testing, but the FCA has highlighted that firms have flexibility in how they design that stress test, particularly in a falling-rate environment. That can create opportunities for some borrowers, but it also means documentation and presentation matter more than ever.
The fastest way to improve your outcome is usually not “finding a magic lender”, it is getting your documents and story aligned, so the numbers in your accounts, SA302s, tax year overviews and bank statements support the same income narrative.
Updated: 17 January 2026
Written by Ben Stephenson, CeMAP-qualified Mortgage Broker, and reviewed by Mortgage Experts.
Manor Mortgages Direct is FCA authorised, FRN 496907, has traded for nearly 30 years, is highly positively reviewed, 4.9 rated on Google, and has helped thousands secure the right mortgage. Bristol-based mortgage brokers, assisting clients nationwide.
Table of contents
What does “net profit” mean for a mortgage application?
Can you get a mortgage using net profit if you’re self-employed?
How is net profit assessed for different self-employed types?
Can you apply with [[One Year’s Accounts]] in 2026?
Can [[Retained Profits]] be used for affordability?
Why this matters more in 2026
Myth vs reality, net profit and self-employed mortgages
What underwriters and surveyors actually look for
Policy exceptions, when rules may be flexed
Case study: net profit and retained profits in action
Checklist for next steps
FAQs
1. What does “net profit” mean for a mortgage application?
Net profit is a simple phrase, but it can mean different things depending on how you trade.
If you’re a sole trader or in a partnership
Most mortgage assessments start with your taxable profit, broadly:
Turnover minus allowable business expenses = profit (the figure HMRC taxes).
That profit is what many lenders view as your “income” because it is:
declared to HMRC, and
evidenced through SA302s and tax year overviews, or finalised accounts.
If you’re a limited company director
This is where confusion is most common.
You might take:
a small salary,
dividends (sometimes irregular),
and leave money inside the company to reinvest.
Some lenders assess affordability using:
salary plus dividends only, or
salary plus dividends plus a share of company profit, or
salary plus dividends plus company profit including Retained Profits (more specialist).
There is no single universal method, which is why packaging and lender selection matters for company directors.
Broker insight: the biggest avoidable disappointment is when a director assumes the lender will “obviously” use company profit, but the application is assessed only on salary and dividends, and the borrowing drops sharply.
2. Can you get a mortgage using net profit if you’re self-employed?
Yes, it is common for self-employed applicants to be assessed using net profit, but the acceptance of your case depends on the quality and consistency of the evidence and on the wider risk picture (deposit, credit profile, property type, commitments).
Here are the most common assessment approaches we see in the UK market:
Two-year average of net profit: often used where profits fluctuate.
Latest year’s net profit: sometimes used where income is rising.
Lower of the last two years: commonly used where income is declining.
Three-year view: sometimes used where there is volatility or sector risk.
Pros and cons of being assessed on net profit
Pros
Can reward strong profitability, even if drawings vary.
Can work well for sole traders who keep accounts tidy and consistent.
Cons
High legitimate expenses can reduce assessed income.
One-off costs and investment years can distort affordability.
Company directors may not get full credit for profits unless the lender’s method allows it.
3. How is net profit assessed for different self-employed types?
This is the part most blog posts oversimplify. In real underwriting, “self-employed” is not one category.
Sole trader
What typically matters:
last 2 years’ SA302s and tax year overviews, or final accounts
consistency of profit trend
personal and business bank statements matching the story
HMRC confirms you can obtain SA302 evidence (for up to the last 4 years once you’ve filed) and a tax year overview, and that these may be requested for mortgages.
Partnership or LLP member
Most lenders focus on:
your share of net profit (not the whole partnership’s profit)
stability of your profit share over time
the partnership’s overall health, especially if profits are thin
Limited company director
This is where your structure can materially change what a lender will “count”.
Underwriters may look at:
salary and dividends evidenced by payslips, P60, SA302s
company accounts (often the last 2 years)
your shareholding percentage
whether profits are available and sustainable, not just reported on paper
Contractors and freelancers
If you operate through a limited company, you often fall into the director category.
If you are paid via umbrella PAYE, you may be assessed more like an employed borrower.If you are genuinely self-employed with contracts, some lenders may also ask for:
current contract(s) and remaining term
contract history
day-rate equivalents (case-dependent)
4. Can you apply with One Year’s Accounts in 2026?
Yes, sometimes, but this is usually where the quality of your story matters more than the headline profit.
When a lender is taking a view on only one year, they are implicitly accepting more uncertainty. So they often want compensating strengths such as:
Same industry continuity: you moved from PAYE to self-employed in the same role/sector.
Strong deposit: lower loan-to-value can reduce perceived risk.
Clean credit profile: minimal recent missed payments, stable conduct.
Strong bank statement evidence: healthy balances, consistent income flow.
Accountant-prepared figures: especially if signed off by a qualified accountant.
Forward-looking evidence: pipeline, contracts, or projections (where acceptable).
The document timing trap that delays applications
A very practical issue in January and February is that people plan to apply “now” but their tax evidence is not ready.
GOV.UK notes you cannot print your SA302/tax year overview until 72 hours after you have sent your tax return.
If your strategy relies on one year’s evidence, missing that timing window can cost you weeks, and in a purchase, weeks can cost you the property.
Broker insight: If your latest year is significantly stronger, it can be worth filing early and aligning your application timeline to the evidence window, rather than applying too soon with weaker historic numbers.
5. Can Retained Profits be used for affordability?
Sometimes, yes, but this is one of the most misunderstood areas for limited company directors.
What are Retained Profits in plain English?
They are profits that remain in the company after costs, and after any tax/dividend decisions, rather than being withdrawn personally.
Why lenders treat this carefully
Retained profits are not automatically personal income. Underwriters typically worry about:
whether the profits are accessible without harming the business
whether the profits are repeatable, not a one-off spike
whether the accounts show profits but cash flow is tight
whether the company has liabilities that “use up” the retained profit on paper
What evidence tends to help
Full signed accounts showing profit and loss reserves
Business bank statements showing cash position aligns with accounts
Clear shareholding and control (for example, majority ownership)
A sensible explanation of why profits were retained (reinvestment, buffers, tax planning)
Stable or improving trading trend
Important reality check: Retained profits can support a stronger affordability narrative, but lenders often still prefer income you have actually drawn, because it is proven personal income.
6. Why this matters more in 2026
Two big 2026 realities affect self-employed borrowers.
The refinance cycle is still heavy
UK Finance forecast that in 2026:
overall gross lending may rise to £300bn
1.8 million fixed rate mortgages are due to end
external remortgaging is forecast to rise, and arrears are forecast to fall further
In plain terms, lenders are competing, but affordability and evidence standards remain rigorous.
Rates fell, but stress testing still exists
The Bank of England cut Bank Rate to 3.75% in December 2025.
Separately, the FCA has reiterated that lenders have flexibility in how they apply the interest rate stress test rule (MCOB 11.6.18R), particularly when rates are falling, and that the rule is about designing an appropriate test rather than mechanically linking to a reversion rate.
Rules and guidance have been evolving
The FCA’s Mortgage Rule Review work in 2025 included changes intended to simplify parts of the regime and increase flexibility (for example, around remortgaging, term reductions, and discussions without forcing advice in every scenario).
Why you should care: In an environment where lenders can be more flexible in some areas, the winners are usually the borrowers whose applications are clean, evidenced, and well-explained.
7. Myth vs reality, net profit and self-employed mortgages
Myth: “If my turnover is high, I will be fine.”
Reality: Turnover can be meaningless if profit is thin. Many lenders assess on net profit, not gross sales.
Myth: “My accountant minimised tax, lenders will understand.”
Reality: Mortgage affordability is usually based on declared income. If tax planning reduces taxable profit, it can reduce borrowing.
Myth: “Dividends are optional so they do not count.”
Reality: Dividends can count, but they are often assessed cautiously if irregular or if company profits do not support them.
Myth: “Retained profits are basically the same as salary.”
Reality: Retained Profits can help with some lenders, but many will not treat them as straightforward personal income.
Myth: “One year’s accounts means automatic decline.”
Reality: One Year’s Accounts can work where the overall risk picture is strong and the story is coherent.
8. What underwriters and surveyors actually look for
When people say “the lender declined me”, it is often an underwriting decision driven by risk signals, not just an income multiple.
Underwriters typically focus on these areas
Income consistency: trend over time, sector stability.
Evidence quality: SA302s, tax year overviews, final accounts, accountant credibility.
Bank statement conduct: overdraft reliance, gambling markers, unpaid items.
Tax position: late filings or unexpected liabilities can trigger questions.
Business resilience: cash buffer, liabilities, exposure to a single client.
Credit profile: missed payments, high utilisation, recent adverse events.
Affordability stress test: capacity if rates rise in future, even if today’s payment looks comfortable.
Common red flags that can cost you the mortgage offer
Profit dropping year-on-year with no clear explanation
A large one-off expense that makes the latest year look weak
Accounts showing profit but business bank statements showing low cash
Director’s loan account issues or unexplained transfers
Multiple recent credit applications just before mortgage submission
Incomplete documentation, or figures that do not reconcile
Soft warning that matters: One missing document can create a chain reaction, valuation delayed, underwriting paused, solicitor not instructed, and your seller starts looking for another buyer.
9. Policy exceptions, when rules may be flexed
This is where a good broker can add real value, because many “computer says no” outcomes are really “policy says no, until it is presented correctly.”
A policy exception is when a lender may consider an application that falls outside a standard rule, because compensating strengths reduce risk.
Situations where exceptions are sometimes requested:
One Year’s Accounts but strong prior PAYE history in the same role
Company director with low salary/dividends but strong profit trend
Recent business restructure (sole trader to limited company)
Short-term dip in profit due to one-off investment costs
Using Retained Profits where accounts and cash position support it
Compensating factors that can help:
lower LTV (bigger deposit or more equity)
strong credit score and low unsecured debt
high household disposable income after committed outgoings
significant savings buffer post-completion
straightforward property and strong valuation outcome
If we mention lender types: This is typically the territory of specialist, intermediary-only lenders rather than mainstream, for example lenders such as Precise Mortgages, Pepper Money, Foundation Home Loans, United Trust Bank, or Tandem Bank, subject to criteria and underwriting. This is not a guarantee of acceptance.
10. Case study: net profit and retained profits in action
Scenario: Limited company director, 70% shareholding, applying for a home purchase.
Salary: modest
Dividends: taken irregularly
Company profits: strong and consistent
Motivation: kept profits in the business for cash buffer and reinvestment
Problem: A mainstream affordability model based only on salary plus dividends produced a borrowing figure well below what the client needed.
What we did (high level):
Reviewed the last 2 years’ full company accounts and personal tax documents.
Built a clear explanation of why profits were retained, and how cash flow supported that.
Packaged the case to a lender whose methodology may consider company profits and, where appropriate, [[Retained Profits]] as part of the affordability picture.
Pre-empted underwriting questions with a short “numbers map” showing where each figure appears in the accounts and tax evidence.
Outcome: The application progressed on a stronger income basis than salary plus dividends alone would have allowed, subject to valuation and full underwriting.
Key takeaway: The client did not “earn more”. The application simply matched the lender methodology to how the client legitimately generated income.
11. Checklist for next steps
Documents to prepare before you apply
SA302s and tax year overviews (usually last 2 years)
Full signed accounts (company or sole trader, as applicable)
3 to 6 months personal bank statements
3 to 6 months business bank statements (often requested)
Proof of deposit and savings history
ID and address documents
Details of any ongoing credit or finance commitments
Questions to ask a broker
Which income method will be used for my structure?
Will the lender use average, latest, or lower year?
If I’m a director, can profits be considered, or only dividends?
If my last year dipped, how should we explain it?
What are the red flags in my bank statements?
How should I time my application around tax filings?
Practical next steps
Avoid taking new credit before mortgage submission if possible.
File your tax return early if your latest year helps your case.
Keep business and personal finances clean and consistent for statements.
If you are unsure, get a broker to do a pre-underwrite review, so problems are found before the lender does.
If you want Manor Mortgages Direct to sense-check your self-employed income position, we can review your documents and outline the approaches that may fit your trading style, with clear expectations and no false certainty.
12. FAQs
1) Will lenders use net profit before or after tax?
Often, lenders focus on the profit figure evidenced by your tax documents or accounts and their standard methodology. For limited companies, approaches vary widely. A broker can confirm which figure a specific lender tends to use.
2) If my net profit increased this year, will the lender use the new higher figure?
Sometimes, but many lenders still average, or they may require consistency over two years. If you are relying on a strong latest year, timing and evidence quality become critical.
3) Can I get a mortgage if my accountant claimed a lot of expenses?
Possibly, but remember expenses reduce taxable profit, which can reduce assessed income. If expenses were genuinely one-off (equipment, premises setup), some lenders may take a view, but many will still use the declared profit.
4) What if I have not filed my latest tax return yet?
That usually limits what can be used as evidence. GOV.UK notes SA302 evidence is available once you have submitted your return and you may need to wait before printing.
5) Do I need two years of accounts for Self-Employed Mortgages?
Two years is common, but not universal. One Year’s Accounts can be possible where the wider case is strong and well evidenced.
6) Can Retained Profits help if my salary and dividends are low?
They may help with some lenders and scenarios, but they are not always treated as personal income. Evidence of sustainability and accessibility is key.
7) Will a falling base rate automatically improve affordability?
Not automatically. The FCA explains lenders must stress test affordability against likely future interest rates, and firms have flexibility in how they design that stress test.