Company Director Mortgages: Salary, Dividends or Retained Profit?

A company director mortgage is a standard residential mortgage, but the income a lender counts can swing by tens of thousands of pounds depending on how it reads your company. Some lenders use the salary and dividends you draw, while others use your share of the profit left in the business. Mortgage One is a whole of market mortgage adviser arranging home mortgages for limited company directors assessed on salary, dividends or retained profit.

For a free initial consultation on how lenders would read your director income, call 01202 155992 or contact Mortgage One.

Can a limited company director get a mortgage?

Yes. A limited company director can get a residential mortgage on the same products and rates as an employed buyer. The difference is evidence. Most lenders want two years of company accounts and SA302 tax calculations, then decide whether to count your salary and dividends, your share of net profit, or your payslips alone.

Directors are often told they count as self-employed for mortgage purposes, and for most lenders that is right once you own a meaningful share of the company. What surprises people is how wide the gap between lenders becomes. The same set of accounts can support a loan of about £259,000 at one lender and over £550,000 at another, simply because one counts the dividends you took and the other counts the profit you earned. The worked example further down shows the arithmetic.

Being a director is not a mark against you. Lenders see a large volume of these cases and the products are the same residential mortgages available to everyone else. The work lies in choosing the lender whose income method fits the way you pay yourself. Contractors working through their own company face a related set of rules, covered in our guide to contractor mortgages and day-rate assessment. If you are buying to let through a company rather than buying a home, our limited company buy-to-let guide covers that route instead.

Salary and dividends: how most lenders assess directors

Most lenders add your basic salary from the latest year to your dividends, taking the lower of the latest year and the two-year average. A director paid a £12,570 salary with £45,000 of dividends is assessed on £57,570, whatever the company actually earned. Dividends must also fit within the company's net profit.

The salary and dividends method is the default because it mirrors what you personally receive and declare to HM Revenue and Customs. It also explains why many directors are assessed on far less than their business makes. For the 2026 to 2027 tax year the personal allowance and the employee National Insurance primary threshold both sit at £12,570, so a salary at that level is a common choice. Dividends above the £500 allowance are then taxed at 10.75% in the basic rate band and 35.75% in the higher rate band, which is why profit is often left in the company rather than drawn.

That tax planning makes sense for the business, but it caps the mortgage. The averaging rule matters too. A director who takes a large dividend in the months before applying rarely gains much, because a lender averaging two years will dilute it and a lender taking the lower figure will ignore the jump entirely. If income has risen steadily, the timing of the application and the choice of lender are worth more than a one-off dividend.

How a mortgage using retained profits lifts borrowing

Some lenders replace dividends with your share of the company's net profit after corporation tax, so profit left in the business still counts. A sole director on a £12,570 salary whose company makes £110,000 after tax is assessed on £122,570 rather than £57,570. At 4.5 times income that more than doubles the borrowing ceiling.

Here is the same director under each method, with £45,000 of dividends drawn from that £110,000 of profit:

·       Salary and dividends: £12,570 plus £45,000 gives £57,570, which at 4.5 times income supports about £259,000.

·       Salary and share of net profit: £12,570 plus £110,000 gives £122,570, which at 4.5 times income supports about £551,000.

Lenders that use net profit apply it in proportion to your shareholding and usually want a substantial stake, often more than half the shares. If you and your spouse each own 50%, your share of that £110,000 is £55,000, so your assessed income is £67,570 and the ceiling at 4.5 times falls to about £304,000. Lenders also take the lower of the latest year and the two-year average of net profit, and they read the balance sheet to check the retained cash is real rather than tied up in unpaid invoices or an overdrawn director's loan account.

Corporation tax is part of the calculation. Profit of £50,000 or less is taxed at 19% and profit above £250,000 at 25%, with marginal relief between the two, so the after-tax figure the lender uses sits below your headline profit. Pension contributions and other costs paid through the company reduce it further, which is worth knowing before your accountant finalises the year.

If your company keeps more profit than it pays out and you want to know which lenders will count it, call 01202 155992 or contact Mortgage One.

When is a director assessed on payslips instead of accounts?

Many lenders treat a salaried director who owns less than 25% of the shares as an employee. You are then assessed on payslips, a P60 and an employer reference rather than company accounts. That route suits directors paid a full salary, but it can ignore dividends unless the lender has a separate policy for them.

This matters most for directors brought into a business with a small equity stake, and for family companies where shares are split between several people. If your salary is substantial, being assessed as employed can be quicker and avoids the wait for two years of accounts. If most of your pay arrives as dividends, the employed route can understate your income badly, and a lender willing to assess you on the company figures may be the better fit.

Shareholding thresholds and the treatment of dividends for minority shareholders differ from lender to lender, so the exact percentage you hold is one of the first facts a broker needs.

How much can a company director borrow on a mortgage?

Once a lender settles on your assessed income, it applies an income multiple, usually around 4.5 times and higher at some lenders for larger incomes. A director assessed on £66,700 can therefore look at roughly £300,000 at 4.5 times, before deposit, outgoings, credit commitments and the lender's own stress test are applied.

The multiple is only half the answer. Lenders also run an affordability model that deducts committed spending, childcare, existing loans and card balances, then tests the payment at a rate above the one you will actually pay. That is why two lenders with the same multiple can still reach different maximums. Our guide to mortgage income multiples sets out where the caps sit and how higher multiples are reached.

To see a realistic range before the accounts go in, run each version of your income through our calculator for how much you can borrow and compare the results. Try the salary and dividends figure first, then your salary plus share of net profit. The gap between the two answers shows how much lender choice is worth in your case. Where the figures run into seven digits, our guide to large mortgages covers how lenders approach bigger loans and layered income.

Accounts, SA302s and the accountant's certificate lenders want

Expect to provide two years of full company accounts, SA302 tax calculations with matching tax year overviews, recent business and personal bank statements, and often an accountant's certificate confirming your income. A smaller group of lenders will consider a director with one year of accounts, usually where you did the same work beforehand.

Full accounts matter. Many small companies file filleted accounts at Companies House, which leave out the profit and loss account and tell a lender nothing about earnings. Underwriters want the full set your accountant prepares, and some will accept a certificate from a qualified accountant in place of chasing every schedule. The SA302s confirm the salary and dividends you declared personally and must agree with the tax year overviews.

Timing helps. If your latest year is stronger, applying soon after those accounts are finalised lets a lender see it. If the latest year dipped, a lender that averages two years may serve you better. Our mortgage application guide walks through each stage to offer, and a mortgage in principle based on the right income figure avoids surprises once the full application is underwritten.

Directors with a new company or a past liquidation

A company that went into liquidation is recorded against the company at Companies House, not on your personal credit file, unless you personally guaranteed debts that then defaulted. Lenders may still ask about previous insolvent directorships, and a new company usually needs one to two years of accounts before most lenders will count its income.

Where a lender asks about past directorships, the answer goes on the form, and a clear explanation of what happened and how the new business differs carries weight with an underwriter. Directors who restart in the same line of work with the same clients are judged more favourably than those starting something unrelated.

Check your own file before you apply, because a personal guarantee called in after a liquidation can leave a default or a county court judgment in your name. You can download your credit report to see what a lender will see. Where the file is clean and the new company has a year of solid figures, a smaller pool of lenders will usually consider the case.

To match your accounts, shareholding and dividend history with lenders whose income method suits them, call 01202 155992 or contact Mortgage One.

Back to Self-Employed Mortgages

The information provided in this article is for general guidance only and does not constitute personal or regulated financial advice. If you'd like to understand what these moves could mean for you, speak to Mortgage One. We can explain your options and timings based on your specific circumstances.

FAQs

1. Can I get a mortgage as a company director?

Yes. Directors get the same residential mortgages as employed buyers. Most lenders want two years of company accounts and SA302s, then assess you on salary plus dividends, on salary plus your share of net profit, or on payslips if you own a small stake.

2. How much can I borrow as a company director?

Most lenders lend around 4.5 times your assessed income, with some going higher for larger incomes. The key variable is which income the lender counts. Salary plus dividends can produce less than half the figure that salary plus share of net profit produces on the same accounts.

3. What income does a director need for a £300,000 mortgage?

At 4.5 times income you need assessed income of about £66,700, and at 5 times about £60,000, before deposit and affordability checks. For a director that figure can come from salary and dividends or, with some lenders, salary and your share of retained profit.

4. Is it harder to get a mortgage as a limited company director?

Not harder, but the evidence is heavier and lender choice matters more. A director who draws a low salary and leaves profit in the company can be undervalued by a lender that counts only dividends, so matching the lender to the income method is the main task.

5. Can lenders use retained profit for a director mortgage?

Yes, some can. They use your salary plus your share of the company's net profit after corporation tax, usually the lower of the latest year and the two-year average, and generally only where you hold a substantial share of the company.

6. Can a director of a liquidated company get a mortgage?

Yes, in many cases. A company liquidation is recorded against the company, not your personal credit file, unless personally guaranteed debts defaulted. Lenders may ask about past insolvent directorships, and income from a new company usually needs one to two years of accounts.

7. Does a mortgage broker help company directors?

Often materially, because lenders read director income in different ways and the same accounts can support very different loans. Mortgage One has whole of market access and matches your salary, dividends, profit and shareholding to the lenders whose method suits them.