How do lenders view limited company directors?
For mortgage purposes, you’re classified as self-employed if you own 20–25% or more of a limited company. This means lenders will ask for company accounts and personal SA302s rather than payslips and P60s.
The critical question is how the lender calculates your income. This single factor can mean a difference of tens of thousands of pounds in borrowing capacity — even between lenders offering the same interest rate.
Salary plus dividends vs salary plus net profit
This is the most important distinction for limited company directors. The method your lender uses directly determines how much you can borrow.
Two approaches to income assessment
| Salary + dividends | Salary + share of net profit |
|---|---|
| Only counts what you personally draw from the company | Counts the company’s profit attributed to your shareholding |
| Most tax-efficient directors draw low salary + moderate dividends | Captures retained earnings you chose not to withdraw |
| This method often underestimates your true earning capacity | Usually gives a much higher income figure |
| Used by many high street lenders | Used by lenders who understand business owners |
| Example: £12,570 salary + £35,000 dividends = £47,570 income | Example: £12,570 salary + £80,000 net profit = £92,570 income |
The difference is significant
In the example above, a salary-plus-dividends lender at 4.5x income would offer £214,065. A salary-plus-net-profit lender would offer £416,565 — nearly double. This is why choosing the right lender is critical.
Do retained profits count towards your mortgage?
Retained profits are the earnings left in the company after paying corporation tax, your salary, and dividends. They sit on the balance sheet and can be drawn down later or reinvested in the business.
Some lenders recognise that retained profits represent genuine earning capacity and include them in their income assessment. Others ignore them entirely. If your company retains significant profits (common for tax planning), the lender you choose makes all the difference.
Lenders that use net profit effectively capture retained earnings because they’re part of the company’s bottom line. This is the key advantage of the salary-plus-net-profit method for directors who retain profits in the business.
What about multiple directorships?
If you’re a director of more than one company, lenders will want to understand each business and how your time is split. Most will base income on your primary company, though some may consider combined income if the businesses are related or you can demonstrate active involvement in both.
Be prepared to provide accounts for each company and explain the nature of each business. If one company pays you a salary and another pays dividends, the lender needs to see the full picture.
Recently incorporated companies
If your limited company is less than two years old, your options are more limited but not closed. Some lenders will accept one year of company accounts if you have prior self-employed or industry experience.
If you incorporated after years of trading as a sole trader, lenders may consider your sole trader accounts as part of your trading history. A broker can present this continuity to the right lender.
Companies incorporated purely as SPVs for property investment are assessed differently from trading companies. See our buy-to-let guide for details on SPV mortgage applications.
The tension between tax efficiency and mortgage affordability
There’s an inherent conflict between minimising your tax bill and maximising your mortgage borrowing. Your accountant aims to reduce your taxable income; your mortgage lender wants to see as much income as possible.
Drawing a low salary and modest dividends while retaining profits in the company is tax-efficient but can severely limit what salary-plus-dividends lenders will offer you. Conversely, drawing higher dividends to show more income means paying more personal tax.
Strategies to balance both
- Use a lender that assesses on salary plus net profit — no need to change what you draw
- Time your mortgage application after a strong trading year
- Discuss income declarations with your accountant 12+ months before applying
- Consider drawing slightly higher dividends in the year before your application
What a broker can do
- Run your figures through multiple lenders’ criteria
- Show you exactly how much each method would let you borrow
- Find the lender that maximises your borrowing without changing your tax strategy
Get specialist advice for company directors
At Clearview Mortgage Solutions, we work with limited company directors every day. We know which lenders use salary plus net profit, which consider retained earnings, and which are most flexible with recently incorporated businesses.
Contact us for a free, no-obligation assessment. We’ll show you how different lenders would view your income and help you maximise your borrowing capacity.
My bank offered me £180,000 based on my salary and dividends. My Clearview broker found a lender who used net profit and I borrowed £340,000. Same company, same accounts — completely different result.