Company Directors

Understanding Company Directors and Proving Income for Mortgages

Many company directors assume they are employed because they receive a salary from their limited company. However, for mortgage purposes, directors are typically classified as self-employed. Lenders assess director income based on either:

1. Salary plus dividends – The most widely accepted approach.

2. Salary plus a share of net company profits – An increasingly common method that benefits directors who retain profits within the business.

Key Considerations for Company Directors Applying for Mortgages

Acceptable Income Structures

• Most lenders calculate income using salary and dividends.

• Some lenders now accept salary plus a share of net profits, which is beneficial if you leave profits in the business instead of withdrawing them as dividends.

• If you’re not drawing your full available income, some lenders understand that you have access to higher earnings if required.

Assessing Trading Figures

When evaluating income, lenders typically require details of:

• Company’s gross and net profit

• Director’s salary and dividends

Lenders usually apply one of the following assessment methods:

✔️ Averaging the last two years' figures (common approach).
✔️ Using the most recent year’s figures if they are lower than previous years.
✔️ Accepting just one year’s trading history (offered by select lenders, beneficial for newer businesses).

Tax Year vs. Company Year-End

Unlike sole traders, a limited company’s financial year does not have to align with the UK tax year (April to April).

• This means figures reported on SA302 tax calculations may differ from the company’s trading accounts.

• Some lenders may require an explanation for differences due to different reporting periods.

Proving Income as a Company Director

Lenders have varying documentation requirements, but common proof of income includes:

📄 Tax Calculation (SA302) and Tax Overview – Confirms salary and dividends taken within a tax year.
📄 Accountant’s Reference or Company Trading Accounts – Verifies company health and net profit figures.

Key Consideration: Retained Profits

If a lender only considers salary plus dividends, but the latest net profit is lower than dividends drawn, they may assume retained earnings were used, making the income seem unsustainable. However, providing a strong justification can help overcome this issue.

Final Thoughts

Getting a mortgage as a company director differs slightly from applying as a sole trader, but lenders understand limited company finances. Whether you take dividends or retain profits, there are flexible mortgage options available.

With the right documentation and a well-prepared case, securing a mortgage as a company director is absolutely achievable. If you're unsure how your income will be assessed, speak to a mortgage expert today for tailored guidance.