Mortgage as a Sole Trader
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.
Most buy to let mortgages are not regulated by the Financial Conduct Authority
Mortgage as a Sole Trader (Part 1)
David explains how the mortgage process works if you are a sole trader.
Podcast approved by The Openwork Partnership on 04/09/2024.
Can I get a mortgage if I’m a sole trader?
Absolutely. There are a few more things to think about, in terms of getting your paperwork ready and improving your success rate with mortgage lenders. But certainly, being a sole trader should not impede you from getting a mortgage.
How long do I need to be a sole trader before I can get a mortgage?
The minimum time is one year. One or two high street lenders would consider giving you a mortgage with just 12 months of sole trading history, but ideally you’ll have two or three years behind you.
The longer you’ve been doing it, the more you could demonstrate a track record and consistency of income. Generally you need a good credit score with just one year’s records – but it is possible.
What documents do I need to prove my income?
First, there are the standard documents for identification and proving your deposit: which means photo ID with a passport or driving licence or even a shotgun licence. You’d need some address identification to prove you are living where you say you live.
Then you need to evidence your deposit. If that’s coming from savings, four months’ bank statements is typical, showing the build-up of funds. We also need some bank statements to show your day-to-day expenditure.
I appreciate not everybody who’s a sole trader has a separate business account, and that’s okay as long as we could see the income coming in. Mortgage lenders want to get a picture of your turnover.
The most important documents for a sole trader are your tax records. Some lenders call them tax calculations, others call them SA302 or self-assessment 302 documents. Effectively, it’s the same thing. It’s a summary page from HMRC showing your earnings and how your tax has been calculated.
That might come from an accountant on their own commercial software, but it’s still acceptable by a mortgage lender. The second document you’re going to need is something called a tax year overview. That will tell the mortgage lender how much tax was due and whether it is still owing or been paid.
Sometimes a mortgage lender might ask for something called an SA100, which is effectively your entire submission to HMRC. That could be about 20 pages, and gives more detail about how your income was calculated. It’s often used where a sole trader has a rental property in the background. It gives an idea of the incomings and outgoings on that rental property and the cost of the finance.
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How does the mortgage process differ between a sole trader and a limited company?
In some respects, it’s absolutely identical. Some mortgage lenders would treat you exactly the same, whether you’re the director of a limited company or a sole trader. They would still assess your income by looking at your SA302 tax calculations and tax year overview.
With other mortgage lenders, there are differences. For a sole trader they would use tax calculations, but if you have a limited company they would potentially look at the strength of the business via company accounts.
They would calculate a company director’s mortgage borrowing capacity not by what you’ve withdrawn from the limited company but your salary plus the share of any profits in that company. That’s the main difference – whether they look at your tax documents or company accounts.
How much can I borrow as a sole trader and do I need to put down a bigger deposit?
The minimum deposit that you need is five percent. That’s exactly the same if you’re working through your own company or if you’re employed.
Mortgage lenders tend to be a little bit more cautious with anybody who’s self-employed. I generally recommend to my clients that if they’ve got more than 5% – perhaps 10% – and can afford to put it down, that would give the lender a bit more confidence. There’s more equity going into the property.
As a sole trader, mortgage lenders will look at your net profit after your expenses. If you’re turning over, say, £50,000 a year, but you’ve got £20,000 of expenses, that leaves £30,000 profit.
Then we apply the multiples, which again differ between mortgage lenders. The total will also be impacted by your financial commitments and dependents. Typically, the amount you could borrow is going to be somewhere between four and five times your net profit after your expenses.
What if I have bad credit? Can I still get a mortgage as a sole trader?
If you have bad credit and you’re a sole trader, it’s still possible to get a mortgage. There are some specialist lenders for people with bad credit, who will also lend to sole traders.
Even better, some of those lenders I’m thinking of could even lend with one year accounts.
It will depend on the level and severity of your credit issues.
Can I get a Buy to Let mortgage as a sole trader?
If you’re getting a Buy to Let mortgage in your personal name, rather than through a limited company, the mortgage lender is going to look at your last year of submitted accounts.
The amount that you could borrow on a Buy to Let is impacted by whether your profit demonstrates that you’re a lower or higher rate taxpayer. On a Buy to Let in a personal name, the amount you could borrow could be hugely impacted by your tax status.
If you’re a higher rate taxpayer, you could actually borrow less on a Buy to Let mortgage than a lower rate taxpayer. I know it sounds strange, but that’s just the way it’s worked out.
How does the remortgaging process work as someone who is a sole trader?
A remortgage as a sole trader is almost exactly the same process as getting a first-time mortgage. The same documentation would be expected. You need proof of income with tax calculations or SA302s and your tax year overviews to demonstrate your income. Then you’ll provide bank statements to show at least three months of income coming in from your work, the level of turnover and expenses.
We then need proof of address for the house or flat you’re living in and ID to prove you are who you say you are. The only difference is that you don’t need to provide evidence of the deposit – that’s now the equity in your property
How do I apply for a mortgage as a sole trader?
You might try and brave it yourself and speak to your own bank or any high street bank. Any of the high street banks are going to be able to cater for first time buyers and sole traders.
However, there are a lot of nuances with self-employment in terms of finding the right mortgage lender for your individual circumstances. That may take the skill and experience of an expert mortgage broker.
We deal with sole traders on a day-to-day basis and we know which lenders could lend you the most, or offer you the right terms based on your individual situation.
How can a mortgage broker help me find a mortgage as a sole trader?
A mortgage broker is going to take away a lot of stress and aggravation. You might spend hours of your time trying to find the right lender for your circumstances, while most mortgage brokers will have an instant idea straight off the bat, just by looking at your paperwork.
You’re going to save yourself a lot of time, energy and hassle. You’re also going to improve your chances of mortgage success by speaking with a mortgage broker that knows how to deal with your individual circumstances.
MOST BUY TO LET MORTGAGES ARE NOT REGULATED BY THE FINANCIAL CONDUCT AUTHORITY.
YOUR PROPERTY MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.
Approved by The Openwork Partnership on 04/09/2024
Mortgage as a Sole Trader (Part 2)
We continue the conversation on mortgages for sole traders with David Sharpstone. Episode two of two, recorded in February 2026.
Podcast approved by The Openwork Partnership on 13/04/2026.
Is it harder for a sole trader to get a mortgage than for a PAYE employee?
Someone employed via PAYE will usually have a basic, guaranteed salary, and that’s very predictable. For a sole trader trying to get a mortgage, it’s not necessarily harder, but it’s assessed differently by a bank.
That’s simply because you don’t have the same level of predictable income – it can go up and down from month to month. That can make it a little trickier for a lender. A bank is going to always scrutinise self-employed income more than that of an employed person.
If you’re a sole trader trying to get a mortgage, it might take an extra week or two, as more checks are done by the bank. Sometimes it can be quicker than that, but it’s worth being aware of.
But if you’re presenting a bank with a good set of self-employed records and you’re demonstrating stable earnings, you can access exactly the same deals as an employed person can get. It’s all about getting your ducks in a row.
How is affordability assessed for sole traders?
For a sole trader trying to get a mortgage, the first thing a lender looks at is your net profit. All the money you’ve taken into your business is your gross. Your net profit is what’s left after your expenses – but before your tax has been paid.
We all know that sole traders love putting expenses against their income to reduce the tax they pay. That’s absolutely fine, but remember that a lender looks at your net taxable profit – usually as an average of the last two years if it’s going up. If it’s on its way down, they normally use the lower figure from the latest year.
A lender then factors in your outgoings – your financial commitments, including any children or dependents in your life. They also consider your lifestyle spending and factor it into your affordability. Lots of things go into the affordability assessment for a sole trader.
Can a newly self-employed sole trader get a mortgage? Can I use one year of accounts instead of two or three?
Yes – some lenders can accept one year’s accounts or the latest year of accounts, but the choice is a lot more limited.
It helps to have a strong previous employment history. If you’ve been employed and have since become self-employed doing the same job, proving that history will be useful.
If you’ve only got one year, another thing that can help is a large deposit of 15% or more. Some mortgage lenders even take a projection from a qualified accountant. If you’re almost at the end of your tax year, but not quite, they can take an accountant’s reference for that.
Can I apply before my accounts are finalised?
It might be possible. Some lenders can accept draft figures from an accountant, but it is rare. You might find that because this is higher risk to the bank, you pay a premium on your monthly payments.
Ideally, your SA302s and your corresponding tax year overviews should be used once they’re fully submitted to HMRC. Finalised accounts will always give you access to more lenders.
Are first-time buyer mortgages available to sole traders?
Yes, if you’re a first-time buyer and also a sole trader, that’s absolutely fine for a mortgage.
You don’t have to have a history of having a mortgage or owning a home.
There are schemes available to first-time buyers who are sole traders, and some are government-backed schemes. Others are regular mortgage products. Mortgage lenders will always focus more on their criteria than on your type of employment.
If you’re a sole trader, have you got two years’ history? That’s very common. Do you have a good set of accounts to back up your income? Does your business look profitable? These are the things that banks will be looking at.
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What if my income fluctuates year to year? Can additional income streams be included?
It’s very common to have fluctuating income – it would be quite a coincidence to have the same net profit year on year. Lenders normally take the average of two or, if it’s lower in the most recent year, they’ll take that just to be cautious.
If you have additional income from benefits or a rental property, for example, they can all go into the pot towards how much you can borrow.
How important is a credit score for a sole trader? Does business debt affect my personal mortgage application?
A credit score is crucial because you need to demonstrate to a lender that you’re reliable at managing your credit. A detailed, deep credit history will always serve you better on a mortgage application than a shallow or recent credit history, which might be the case if you haven’t been in the UK for long.
Any missed payments, defaults, or high utilisation of debt will go against you when getting a mortgage as a sole trader.
Sole traders might borrow money to buy a van, for example. That might be a business expense, but because your name is on that debt, you’re personally liable for it. That will show on your personal credit profile. Even a business expense will actually count against you for mortgage affordability.
Should I reduce expenses before applying for a mortgage?
Mortgage lenders will assess your net income after expenses. So, whilst having lower business expenses can increase declared profit, you should avoid artificially inflating this when applying for a mortgage.
Your income needs to be sustainable and honest, and your accounts should be a true and fair reflection of how you run your business. They shouldn’t be manipulated with a mortgage in mind.
Just do what you would normally do. If that’s enough to get a mortgage, great. But I wouldn’t advise anybody to lose receipts or expenses when getting a mortgage – there’s the danger a bank would pick up on that.
How long does a sole trader mortgage application take?
From the point it’s submitted, it usually takes three to six weeks. It depends on the individual situation and the bank that we’re going to.
It can be longer sometimes. I’ve known applications to take up to three months before the mortgage is approved – especially if a lot of background checks are being done. Sole trader mortgage applications do take longer than employed ones.
Sometimes accounts need to be verified, the income could be quite complex, or underwriters have queries, and we need to go back to the client, or the client needs to ask their accountant for more information.
What common mistakes do sole traders make when applying?
The first one I often see is poor record-keeping. I did a mortgage for a client this week who has been self-employed for two years and hasn’t submitted a tax return yet.
I’m not an accountant, so I don’t know whether that was legal. If they were meant to do one, they certainly hadn’t paid the tax, so they might be getting some fines. You’ve got to keep your records up to date to avoid late fines.
Another mistake can be large, unexplained income swings. If your income is shooting up massively year on year or it’s on a downward trend, make sure there’s a good explanation.
If you’re a sole trader in construction, for example, you might have bought a van for cash in your first year of trading. Your profit might then be low, but that van will last you for the next six or seven years.
In your second year, you don’t have that expense, so even if your turnover is the same, your profit will be higher that second year. If there are good explanations, that’s fine. But having no explanation can be a mortgage disaster.
Other mistakes include mixing your personal and business accounts together. Try to have business-related expenses or incoming payments on a separate bank account. If it’s blended in with your personal expenditure, it becomes very difficult for a lender to understand your lifestyle spending.
Another mistake is going to a bank or a mortgage broker without checking your credit file. That’s really important. You need to have an understanding of whether you have good credit or poor credit. Are there any unresolved issues that need to be jumped on before they get worse?
Run a credit check with Experian or Equifax – the two main credit reference agencies in the UK. It’s quite easy to get a report from them.
The last big mistake is choosing the wrong lender. If you’re not going to a mortgage broker that specialises in the self-employed, you could end up going to the wrong bank entirely. Eventually, you’ll be declined, and you’ll have needless hard searches on your credit file, which could cause a problem for the next application.
You could end up wasting money on mortgage fees or survey fees, or even losing the house you want to buy. There could be quite a few weeks’ delay before you realise you’re with the wrong lender. A good mortgage broker who understands self-employed income would guide you through that.
How can I improve my chances of approval?
Keep great accounts and have tidy paperwork. If you can, use an accountant. They come at a cost, but perhaps the year you’re planning to get a mortgage, see an accountant to make sure your books look accurate.
I know sole traders don’t necessarily require accountants, but it gives lenders comfort to know that your accounts were submitted by a qualified professional.
Check your credit history and don’t miss any mortgage payments. Have a larger deposit if you can. The usual minimum is 5%, but try to save for 10% – or if you’ve got 10%, try and push it to 15%. Not only would that get you a better interest rate, but it also gives comfort to the bank and lowers the risks to them.
Working with a mortgage broker that specialises in the self-employed will massively improve your chances of getting a mortgage. We know the different nuances and how to present your individual circumstances. We’ll pick the right bank for your individual situation.
Key Takeaways:
- Getting a mortgage as a sole trader is assessed differently than for a PAYE employee due to fluctuating income, but it is not necessarily harder. However, applications may take longer – usually three to six weeks, or sometimes up to three months – due to background checks and verification.
- Lenders primarily look at your net taxable profit (gross income minus expenses, before tax). They typically use the average of the last two years of net profit, but if your income is going down, they will normally use the lower figure from the latest year.
- While two years of history is common, some lenders can accept one year’s accounts or the latest year of accounts, especially if you have a strong previous employment history in the same job or a large deposit of 15% or more. Finalised SA302s and corresponding tax year overviews are ideal and provide access to more lenders.
- A detailed credit history is crucial, and any missed payments or defaults will count against you. Any business debt for which you are personally liable, such as a loan for a van, will show on your personal credit profile and affect your mortgage affordability.
- To maximise approval, you should keep great accounts, consider using a qualified accountant, aim for a larger deposit (10% to 15%), and work with a mortgage broker who specialises in self-employed applicants.
YOUR PROPERTY MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.
For specialist tax advice, please refer to an accountant or tax specialist.
Approved by The Openwork Partnership on 13/04/2026.
Published 04/2026.
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