Sole Trader Mortgage
As a sole trader your mortgage is assessed on net profit, not turnover. That single distinction explains most of the surprise applicants feel when they first see the borrowing figure.
- Why net profit is the figure, not turnover
- How expenses quietly reduce what you can borrow
- What each specialist lender publishes for sole traders
- Which documents settle the income question
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Send us your last two years of net profit and we will tell you what that supports and which lenders will look at it.
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Net profit is the number that counts
A sole trader who invoices 120,000 pounds a year and spends 70,000 pounds running the business has a net profit of 50,000 pounds. It is the 50,000 pounds a lender assesses, not the 120,000 pounds. This is the most common misunderstanding on a sole trader application, and it changes the realistic purchase price rather than just the paperwork.
It also creates a real tension. Claiming every allowable expense reduces your tax bill and reduces your mortgage capacity at the same time, because both are calculated from the same profit figure. Neither answer is wrong, but the trade-off is worth discussing with your accountant in the year before you plan to buy rather than in the month you apply.
Lenders differ slightly in what they will add to net profit. Precise publishes its sole trader income definition as net profit plus declared private pension, which means declared pension contributions can be counted. Pepper Money works from two years of SA302s for sole traders, and publishes add-backs only for applicants who own 100 per cent of a business, subject to finalised accounts.
If your profit has moved sharply between years, read our latest year or average income page before choosing a lender, because which year is used can matter more than the profit itself. GOV.UK sets out what you can and cannot deduct in its guidance on expenses if you are self-employed.
At a Glance
How sole trader income is defined by lender
Reproduced from each lender own published criteria guide.
| Lender | Sole trader income definition | Documents |
|---|---|---|
| Precise | Net profit plus declared private pension | 2 years of HMRC tax calculations and corresponding tax year overviews, or accounts. Minimum 12 months trading. |
| Pepper Money | 2 years of SA302s. Add-backs available only to applicants who own 100 per cent of the business, and only with finalised accounts. | Last 2 years unless only 1 year exists because of the trading period, plus the latest month business bank statement. Minimum trading period 12 months. |
| Aldermore | Assessed from tax calculations and tax year overviews | 2 years standard. 1 year considered with corroborating evidence and at a reduced maximum loan to value. |
Criteria correct as at 14 August 2026. Sources: Precise Mortgages Residential Criteria Guide; Pepper Money Mortgage Criteria Guide; Aldermore Residential Criteria Guide. Correct as at 14 August 2026. Criteria change without notice. Lender criteria change without notice and this table is a general guide, not advice or an offer of credit. Your own circumstances, the property and the lender’s assessment at the time will determine what is actually available to you.
What a sole trader application needs
Sole trader cases are usually the most straightforward self-employed applications, provided the paperwork is complete and the profit figure is understood in advance. Registration and record-keeping obligations are set out in the GOV.UK guidance on setting up as a sole trader.
Where to go next
The pages most often read alongside this one.
Partnership Mortgage
Your share of the net profit is the figure that counts. How lenders evidence the share.
Am I Self-Employed?
The 25% shareholding rule catches people who think of themselves as employed.
Latest Year Or Average?
The single policy choice that most often decides how much you can borrow.
SA302s Or Full Accounts
Tax calculations, tax year overviews, finalised accounts – what each lender actually wants to see.
Mortgage With 1 Year Accounts
Which lenders consider a single year, what extra evidence they ask for, and the LTV you give up.
Mortgage With Declining Profits
A down year does not automatically end it – but it does change which lender and which figure applies.
Self-Employed Mortgages
The main guide: how lenders assess self-employed income, what they ask for and which lenders are worth approaching.
How Much Can I Borrow?
See what your income could realistically support before you speak to a lender.
How we place a self-employed or complex income case
Specialist lenders underwrite manually, so how the income is evidenced and presented genuinely changes the outcome.
Establish how you are actually classed
Lenders do not all draw the line in the same place. Precise treats anyone with a shareholding of 25% or more, or who is responsible for paying their own tax and National Insurance, as self-employed. Getting this right first decides which criteria apply to you.
Read the accounts the way an underwriter will
We work from your tax calculations, tax year overviews and finalised accounts rather than a rough turnover figure, because the number a lender uses is often materially different from the number you think of as your income.
Match the income shape to the right lender
Latest year or average, salary and dividends or share of net profit, one year of accounts or two – these are lender policy choices. We place you against published criteria rather than guessing.
Package the case properly
Specialist lenders underwrite manually. A clear note explaining a dip in profit, a change of trading style or a new contract usually carries more weight with an underwriter than the raw figure on its own.
Plan the next few years
Trading history builds. We look at whether waiting for one more set of accounts, or how you draw income between now and then, would open up materially better options at your next remortgage.
Read More If You Work For Yourself
How your accounts are read is only part of it. These pages cover the rest of the case.
Self-Employed Mortgage Guide
How lenders actually read accounts, day rates and dividends.
Self-Employed Mortgages
How lenders read accounts, day rates and dividends when you work for yourself.
How Much Can I Borrow?
A realistic borrowing figure before you start viewing properties.
Find out what your net profit actually supports
Send us two years of figures and we will tell you the realistic borrowing range and which lenders suit the shape of your accounts.
Read more about our partnership mortgages, latest year or average income or self-employed mortgages guide.
Sole Trader Mortgages - Frequently Asked Questions
Do lenders use my turnover or my profit?
Net profit, in virtually every case. Turnover tells a lender how much money passed through the business, not how much you earned from it. Precise, for example, publishes its sole trader income definition as net profit plus declared private pension. A strong turnover with thin margins produces a modest borrowing figure.
How many years of accounts do I need as a sole trader?
Two is the usual requirement. Precise publishes two years of HMRC tax calculations and corresponding tax year overviews or accounts, with one year considered by referral. Aldermore works to a two-year standard with one year considered where there is corroborating evidence. Pepper Money asks for the last two years unless only one exists because of the trading period.
Will claiming expenses stop me getting a mortgage?
It will not stop you, but it will reduce the figure a lender works from, because the assessed income is profit after expenses. There is a genuine trade-off between minimising tax and maximising borrowing, and it is best considered in the tax year before you plan to buy rather than after the return is filed.
Can pension contributions be added back?
With some lenders. Precise publishes net profit plus declared private pension as its sole trader definition, which means declared contributions can be counted. Pepper Money publishes pension contributions among the add-backs available to applicants who own 100 per cent of a business, and states that finalised accounts will be required.
Does it help to incorporate before applying?
Not usually, and often the opposite in the short term. Incorporating changes the income definition and can reset how a lender views the trading history, which is rarely what you want immediately before an application. If incorporation is planned for other reasons, do it well ahead of a purchase.
What deposit will I need?
The same loan to value bands apply as for an employed applicant, so the deposit is driven by the property and the loan rather than by being self-employed. What changes is the income figure the loan is measured against. Where you have only one year of accounts, expect a lower maximum loan to value and therefore a larger deposit.
I am a sole trader with a CIS card. Which applies?
Both can, and the better route depends on the lender. Some lenders will assess a CIS subcontractor from payslips and deduction statements rather than full accounts, which can produce a higher usable income than net profit after expenses. It is worth comparing the two before applying.
Do I need a qualified accountant?
For most specialist lenders, yes, and the accepted bodies differ between lenders. Precise and Aldermore both publish lists and those lists are not identical. Straightforward cases can sometimes proceed on HMRC documents alone, but anything involving add-backs or certification will need a qualified accountant.
What if my profit is much higher this year?
Then the choice between the latest year and an average matters a great deal, because an averaging lender will effectively ignore half of the improvement. Where growth is genuine and continuing, evidence from the current year helps. Our latest year or average guide covers how the choice is made.
Can I use a joint application to borrow more?
Often yes, if the second applicant has income of their own. Their employment status does not need to match yours, and a mix of employed and self-employed income is entirely normal. Both incomes will be assessed on their own terms and then combined.
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.