How to Calculate Self Employed Income for Mortgage
Calculating self employed income for a mortgage starts with your tax records, not your bank balance. If you are a sole trader, lenders usually use your net profit as shown on your tax returns, often averaged over the last two years. If you run a limited company, some lenders use salary plus dividends, while others will consider retained profit as well.
The averaging matters. Two years at £40,000 and £50,000 give an average of £45,000, even though your latest year was higher. A single strong year rarely counts in full, and a falling trend can lead a lender to use the lower year. Keeping clean, up-to-date accounts and filing on time makes the whole process smoother.
Once you have the income figure, multiply it by an income multiple, commonly around 4.5x, to estimate maximum borrowing, then add your deposit for the maximum property price. That figure is only a starting point: outgoings, credit history and the lender's own affordability model all shape the final offer.
- Sole traders: net profit from tax returns, usually averaged over two years.
- Limited companies: salary plus dividends, sometimes retained profit.
- Average income × income multiple gives a first estimate of borrowing.
Try the free calculator to work out your own figures in seconds.