How do lenders view limited company directors?
For a mortgage, you count as self-employed once you own 20–25% or more of a limited company. So lenders ask for company accounts and personal SA302s instead of payslips and P60s.
The question that really counts is how the lender works out your income. That one factor can shift your borrowing by tens of thousands of pounds, even between two lenders offering the same interest rate.
Salary plus dividends vs salary plus net profit
This is the distinction that matters most for company directors. The method your lender uses sets 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
Take the example above. At 4.5x income, a salary-plus-dividends lender offers £214,065. A salary-plus-net-profit lender offers £416,565, close to double. That gap is why the choice of lender matters so much.
Do retained profits count towards your mortgage?
Retained profits are the earnings left in the company once corporation tax, your salary and your dividends are paid. They sit on the balance sheet, ready to draw later or to put back into the business.
Some lenders treat retained profits as real earning power and count them in your income. Others leave them out completely. If your company holds back a lot of profit, which is common for tax planning, the lender you pick makes all the difference.
Lenders that assess on net profit pick up retained earnings automatically, since those earnings are part of the company’s bottom line. That’s the main draw of the salary-plus-net-profit method for directors who keep profit in the business.
What about multiple directorships?
Direct more than one company and lenders will want to see what each business does and how your time divides between them. Most work from your main company, though some will look at combined income where the businesses are linked or you can show you’re active in both.
Have accounts ready for each company and be able to explain what each one does. If one pays your salary and another pays dividends, the lender needs the whole picture.
Recently incorporated companies
A limited company under two years old narrows your options without closing them. Some lenders will take one year of company accounts where you have earlier self-employed or industry experience behind you.
If you went limited after years as a sole trader, some lenders will count those sole trader accounts as part of your trading history. A broker can put that continuity in front of the right lender.
Companies set up purely as SPVs (special purpose vehicles) for property investment are assessed differently from trading companies. Our buy-to-let guide covers SPV mortgage applications in detail.
The tension between tax efficiency and mortgage affordability
Keeping your tax bill down and pushing your mortgage borrowing up pull in opposite directions. Your accountant works to shrink your taxable income. Your lender wants to see as much of it as possible.
Taking a low salary and modest dividends while leaving profit in the company keeps tax down, but it can badly limit what a salary-plus-dividends lender will offer. Draw higher dividends to show more income and you pay more personal tax for it.
Strategies to balance both
- Use a lender that assesses on salary plus net profit, so you do not have 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 all the time. We know which lenders assess on salary plus net profit, which count retained earnings, and which stay flexible with recently incorporated businesses.
Get in touch for a free, no-obligation assessment. We’ll show you how different lenders would read your income and help you borrow as much as your figures support.
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.