Self Employed Hub

Policies and Processes relating to Self Employed Customers

ONLY FOR USE BY MORTGAGE INTERMEDIARIES

We're here to support a range of self employed clients

At a glance

The business must be based in the UK or Republic of Ireland

Guidance for self-employed applications:

Packaging guide

Affordability calculator

Please check these before completing an Agreement In Principle or Full Mortgage Application.

Sole traders

A sole trader is anyone who’s earned more than £1,000 from their own business in a tax year, which runs 6th April to 5th April.

To qualify for one of our mortgages a customer must:

  • submit their tax returns to HMRC or Irish Revenue Commissioners.
  • be trading for a minimum of two full years with trading figures from that time, including income from land and property (hobby and professional landlords).

To apply:

We’ll either use the average of the last two years income, or the most recent year’s net profit income, whichever is the lower.

Customers must submit their tax return, tax year overview and three months’ business and personal bank statements:

  • tax returns (SA100) that have been submitted to the Inland Revenue and are complete can be used (returns that are shown as ‘in progress’ will not be accepted) or we can accept accounts submitted on their accountants’ software.
  • the tax year overview must confirm the customer’s Unique Tax Reference number and the figures on the submission.
  • as it's not a legal requirement for sole traders to have separate business banking please make it clear on the application if their personal accounts are being submitted.

Support for foster carers

HMRC treat foster carers as being self-employed, however, the SA302 is only used to determine any tax and NI payable after any qualifying amount has been deducted.

Foster carers should provide Local Authority confirmation of the last two years’ payments received, along with confirmation that the customer is still a registered foster carer.

Partnerships

We offer mortgage solutions for customers in simple partnerships and in limited liability partnerships (LLPs).

Simple partnerships

Simple partnerships are where two or more owners share the business’s profits, and each partner pays tax on their share.

There’s no legal requirement to lodge accounts at Companies House. Instead, simple partnerships can submit self-assessment tax returns much like a sole trader does.  They decide how their share is split, but it’s usually split equally between the partners.

To apply:

We’ll either use the average of the last two years income, or the most recent year’s net profit income, whichever is the lower.

Customers must submit their tax return, tax year overview and three months’ business and personal bank statements:

  • tax returns (SA100) that have been submitted to the Inland Revenue and are complete can be used (returns that are shown as ‘in progress’ will not be accepted) or we can accept accounts submitted on their accountants’ software.
  • if the latest accounts or tax returns are more than 18 months old, the business performance since that date must be confirmed by a chartered or registered accountant.
  • the tax year overview must confirm the customer’s Unique Tax Reference number and the figures on the submission.
  • as it's not a legal requirement for sole traders to have separate business banking please make it clear in the application if their personal accounts are being submitted.
  • customers who don’t use an accountant should provide their last three months’ personal and business bank statements to support their tax returns.

Salaried and equity partners of LLPs

Salaried & equity partners of LLPs (limited liability partnerships) are usually professionals such as accountants, solicitors, barristers, doctors, and dentists. 

An equity partner owns a portion of a company, is entitled to part of its profit, and receives a regular salary in exchange for their services for the company.

A salaried partner usually works for the company exclusively, while an unsalaried partner may have another job or other investments. A salaried partner may be a part of the company's management team (or even its only manager) while an unsalaried partner has little or no management role.

To apply:

  • in most cases we’ll use the last two years tax assessments showing their total earnings for the year (which may be employed and self-employed).
  • for some blue-chip LLPs, we can accept a letter from the finance director detailing the customer’s renumeration package together with their payslips.
  • we also need to know if there is a professional practice loan in place and what the repayment terms are.

Customers must submit their tax return, tax year overview and three months’ business and personal bank statements:

  • tax returns (SA100) that have been submitted to the Inland Revenue and are complete can be used (returns that are shown as ‘in progress’ will not be accepted); alternatively we can accept accounts submitted on their accountants’ software.
  • if the latest accounts or tax returns are more than 18 months old, the business performance since that date must be confirmed by a chartered or registered accountant.
  • the tax year overview must confirm the customer’s Unique Tax Reference number and the figures on the submission.
  • as it's not a legal requirement for sole traders to have separate business banking please make it clear in the application if their personal accounts are being submitted.
  • customers who don’t use an account should provide their last three months’ personal and business bank statements to support their tax returns.

Limited companies

In a limited company the business is legally separated from its owners (shareholders) and managers (directors). It must be incorporated at Companies House. 

This type of structure limits the amount of liability the shareholders and directors have to their stake in the company, which means that the finances of the people who run it are separate from the personal finances of the shareholders or directors.

A limited company can keep any profits it makes after paying tax.  This means that if a shareholder or director of a limited company applies for a mortgage, they are only able to use the income that the limited company has paid them in salary or dividends (return on shares).

To apply:

Limited company directors with a shareholding of 20% or more of the company are assessed as self-employed.

For these customers we'll use:

2 years salary/Directors Remuneration and dividends
• Where the latest year’s income has remained the same or increased, we will use an average.
• Where the income has decreased, we will use the latest year.
 
Example
 

Income

2022

2023

Salary (Directors remuneration)

£12,000

£13,000

Dividend

£35,000

£40,000

Total

£47,000

£53,000


 
Income has increased so we will average.
£47,000 + £53,000 / 2 = £50,000
 
Limited company accounts must be submitted to Companies House annually so they can be viewed by any member of the public.  Most Limited Company accounts must be filed within nine months of the accounting reference date to avoid penalties.  A company can change its accounting reference date, sometimes this means a shorter accounting period than the standard 12 months.
 
For information on customers who own less than 20% of a company and receive Dividend, please see the Income and Packaging Guide.

Customers must send us:

  • the finalised company accounts that cover the last two years’ trading.
  • the last two years’ tax year calculations (SA302).
  • the tax year overview (to show tax paid) or two years’ tax returns (SA100) and tax year overview.
  •  accounts should be no older than 18 months old when the underwriter assesses the case.
  • three months’ personal and business bank statements to support their tax returns.
  • all relevant limited company accounts along with all the corresponding bank statements in the case of complex company structures (for example, where there’s more than one limited company set up under one holding company).

Important notes:

  • the business should be making a profit and be solvent.
  • the dividend payments should not exceed the net profit after tax. We will not accept income from retained profit or directors’ loans (money being repaid to the director by the company).
  • if the company shows less profit than normal due to a one-off extraordinary acquisition (eg machinery)  please supply a written letter of explanation from the company accountant.

Contractors

What is the definition of a contractor?

We treat anyone who undertakes a contract to perform labour or service or who provide materials, and who earns under £75,000 a year, as self-employed – for these customers please see the information under sole trader, partnership and limited companies.

For self-employed contractors who earn more than £75,000 per year, we’ll calculate their income as their average weekly contract income multiplied by 46.

Customers must send us:

  • their latest three months’ consecutive personal bank statements for their main account (this isn’t required if their main account is with NatWest or Royal Bank of Scotland).
  • where significant business expenses are identified on the application, three months’ consecutive bank statements (personal or business) detailing these.
  • a copy of the contract (or contracts) to encompass a 12-month period, with a minimum of six months’ contracts already completed immediately preceding the date of application.
  • confirmation that they’ve taken no more than a six-week break between contracts in the 12-month period.
  • confirmation that their tax position is paid and up to date.

We can also help with day-rate contractors who have switched or who are switching either to a fixed short-term contract or to an umbrella company as long as they continue to meet the criteria for our existing high income day rate contractor. 

If a contractor is trading through a limited company, there are some additional criteria:

When using this website to submit an application key the applicant as ‘Self-employed’ NOT ‘Employed’.

The application must be one of the following:

  • a single application where the applicant owns 100% of the company.
  • a joint application where one applicant owns 100% of the company.
  • a joint application where the company is jointly owned by both applicants.
  • a joint application where one applicant owns 100% of the company and the other applicant is employed by the company (in this instance the employed applicant’s income should be excluded to avoid double-counting).

Any significant business expenses that are not covered by the applicant’s contract must be fully understood, evidenced and accounted for in the affordability calculation, including:

  • car/finance loans.
  • extended travel and accommodation costs.
  • training courses.
  • professional indemnity insurance.
  • partner/spouse/employee salaries (spouse’s income only needs to be factored in if their income is being included on the application under the ‘income’ section).

Fixed short-term contracts

Please also include in the application:

  • the most recent four weekly payslips.
  • a copy of the contract, even where the applicant has not yet started the contract.  If the applicant does not have four weekly payslips then a copy of the contract along with any payslips received so far should be provided.

Umbrella company contracts

Please also include in the application:

  • the most recent four weekly payslips
  • a copy of the contract, even where the applicant has not yet started the contract 
  • the amount to be levied by the Umbrella Company for use of their services deducted from the customer’s income.  If this is not clear, we may not be able to assess the application until we see sight of the first payslip

Other contractors

For any cases that do not fit under the above criteria then our standard PAYE contract worker policy will be applicable.

For all employed PAYE and CIS contractors, please visit our A-Z.

Guidance for contractors

Please refer to our Income and Packaging Guide for income proof.

 

Government support schemes

We can help self-employed customers who have historically claimed SEISS grants.

We’ll use the average of the last two years or the most recent years income, whichever is the lower. This figure is taken from the net profit before tax has been paid.

Customers will need to send us three months business bank statements, clear of any SEISS grant income (to show they’ve bounced back). 

FAQs