Limited company director mortgages
If you run a limited company, how your mortgage lender calculates your income can make a huge difference to how much you can borrow. Some lenders only count your salary and dividends; others factor in retained profits too. This guide explains the options and how to maximise your borrowing.
In this guide
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
Two approaches to income assessment
Salary + dividends
- Only counts what you personally draw from the company
- Most tax-efficient directors draw low salary + moderate dividends
- This method often underestimates your true earning capacity
- Used by many high street lenders
- Example: £12,570 salary + £35,000 dividends = £47,570 income
Salary + share of net profit
- Counts the company’s profit attributed to your shareholding
- Captures retained earnings you chose not to withdraw
- Usually gives a much higher income figure
- Used by lenders who understand business owners
- Example: £12,570 salary + £80,000 net profit = £92,570 income
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
The tension between tax efficiency and mortgage affordability
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.
- 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
- 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
“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.”
Related guides
More guides in our self-employed mortgage hub.
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