Last reviewed: June 2026
TL;DR- Limited company directors with a significant ownership stake (typically 20-25%+) are assessed as self-employed rather than employed, even if they also receive a salary.
- Most lenders assess director income as salary plus dividends; some specialist lenders use salary plus net company profit (or the director's share of it).
- Using salary plus net profit can significantly increase the assessable income where profits are retained in the company rather than extracted as dividends.
- Two years of company accounts and SA302 tax calculations are the standard income evidence documents.
Why Directors Are Treated as Self-Employed
A limited company director who owns a significant stake in their company - typically 20-25% or more of the share capital, depending on the lender's definition - is treated as self-employed for mortgage purposes. This is because they have control over how much they pay themselves and when, which means their salary alone does not reliably reflect the financial resources available to them.
This treatment applies even if the director is also registered as an employee of the company and receives a PAYE salary. The director's control over dividend declarations means that the PAYE salary understates their full income in most cases where the standard tax-efficient structure (low salary, high dividends) is used.
Salary Plus Dividends Assessment
The most common lender approach is to assess director income as the sum of the director's PAYE salary and the dividends they have received from the company in each tax year. This is verified by SA302 tax calculations, which show both employment income and dividend income, and by personal bank statements confirming dividend receipts. Company accounts showing the dividends declared are also typically required.
This approach works well where the director extracts a significant proportion of profits as dividends. Where profits are retained in the company and dividends are low, the assessable income may be lower than the company's actual financial performance would support.
Salary Plus Net Profit Assessment
Some specialist and building society lenders use a different approach: assessing the director's salary plus the company's net profit (or the director's proportionate share of net profit where the company has multiple shareholders). This can produce a significantly higher assessable income where the company is profitable but the director has chosen to retain profits rather than extract them as dividends.
For a director who has retained £100,000 in the company rather than paying it as dividends (for tax efficiency reasons), the salary-plus-dividends approach might assess income at £40,000 (salary £25,000 + dividends £15,000), while the salary-plus-net-profit approach might assess it at £125,000 (salary £25,000 + net profit £100,000). The difference in maximum loan can be substantial. A specialist broker can identify which lenders use the net profit approach and whether the company accounts support this method.
Documents Required
For a director mortgage application, lenders typically require: SA302 tax calculations for the last two or three years; tax year overviews for the same periods; certified company accounts for the last two or three years prepared by a qualified accountant; personal bank statements for three to six months; company bank statements for three to six months; and proof of the directorship and shareholding (Companies House records are publicly available).
Frequently Asked Questions
What if I own less than 20% of the company - am I still treated as self-employed?
Most lenders use a 20-25% ownership threshold as the trigger for self-employed treatment. A director who owns less than this threshold may be assessed as an employee using payslips and P60s in the standard way. The specific threshold varies by lender. Directors with small shareholdings in larger businesses where they have limited control over their remuneration are more likely to be treated as employed.
Can I include a spouse's or co-director's shareholding to reduce my own apparent ownership?
No. Lenders assess the director's individual shareholding when determining self-employed status. The fact that another family member holds shares does not reduce the director's individual ownership percentage for mortgage assessment purposes.
What if the company has only been trading for one year?
Most lenders require two years of company accounts. Some specialist lenders consider director applications with one year of accounts, particularly where the director has a strong prior employment record in the same field. One year of trading typically limits lender choice and may result in lower maximum loans and higher rates.
Does retained profit in the company affect my personal creditworthiness?
Retained profit in the company is a company asset, not the director's personal asset. It does not appear on the director's personal credit file and does not directly affect personal credit scores. However, some lenders use salary-plus-net-profit assessment (as described above), which does consider the company's retained profit in calculating the director's assessable income for mortgage purposes.
