Being self-employed for only a year can make a mortgage application feel more complicated, but it does not automatically mean you need to wait another 12 or 24 months before speaking to a lender.
Many lenders still prefer two or three years of accounts or tax records when assessing self-employed income. MoneyHelper says self-employed applicants are typically asked for two or three years of tax returns and business accounts. However, lender criteria are not identical, and some lenders have specific routes for applicants with only one year’s trading history.
Can I get a mortgage with only one year’s accounts?
Potentially, yes. Whether you can proceed will depend on more than the age of the business. Lenders may look at the type of work you do, your previous employment, how the business is performing, the deposit available, your credit profile, existing commitments and the evidence available to support your income.
There are lenders in the UK market that explicitly consider eligible self-employed applicants with one year’s accounts. For example, Principality Building Society currently publishes a one-year self-employed proposition for eligible sole traders and limited company directors. That does not mean every applicant will qualify, and product availability and criteria can change.
Why do some lenders prefer two or three years?
The longer a business has traded, the more evidence a lender has to assess whether income is sustainable. A lender may compare different accounting periods, look for rising or falling profits and check whether the most recent figures appear consistent with the wider business picture.
With only one completed year, there is less historic evidence. That is why the quality of the supporting information can become particularly important.
What might a lender want to see?
The exact documents vary by lender and by whether you are a sole trader, partner or limited-company director, but they may include:
- finalised accounts prepared by a suitably qualified accountant;
- SA302 tax calculations and corresponding Tax Year Overviews;
- personal and business bank statements;
- evidence of your deposit;
- details of existing loans, credit cards and other commitments;
- information about your previous employment or experience in the same industry; and
- evidence that the business continues to trade successfully after the accounting year end.
MoneyHelper also notes that lenders assess affordability using both income and regular outgoings, rather than looking at headline earnings alone.
Does it matter whether I am a sole trader or a company director?
Yes. The way income is assessed can differ significantly.
A sole trader will commonly be assessed using taxable profit shown in the tax calculations. A limited-company director may instead be assessed using salary and dividends, while some lenders may have different approaches to retained profit or company earnings in appropriate cases.
This is one reason why two applicants earning similar amounts through their businesses can receive very different borrowing outcomes depending on the lender’s criteria.
If you run a limited company and retain profits within the business, you may also find our guide on company director mortgages and retained profits useful.
Will a larger deposit help?
A stronger deposit can improve the range of options available, but it is not a substitute for affordability or acceptable income evidence. The lender will still need to be satisfied that the mortgage is affordable and appropriate under its criteria.
Applicants with a smaller deposit may face a narrower choice, particularly where the trading history is short. The combination of loan-to-value, credit history, income evidence and business track record needs to be considered together.
What if I was employed in the same profession before becoming self-employed?
That background can be relevant. A newly self-employed accountant, dentist, IT consultant, builder or other professional who previously worked in the same field may present a different risk profile from somebody who has moved into an entirely new industry.
Some lenders specifically consider prior experience when assessing shorter trading histories. It is therefore worth explaining the complete employment and business story rather than simply stating that the company is one year old.
Should I wait until I have two years’ accounts?
Not necessarily. Waiting may widen your options, but there is little benefit in assuming you cannot obtain a mortgage without first checking the current market.
If you are planning to buy or remortgage, an early assessment can establish what evidence you already have, whether your current figures are sufficient for any suitable lenders and what may improve your position if you do need to wait.
Avoid making multiple applications just to test the market
Mortgage criteria can vary considerably, especially for self-employed applicants. Making several full applications without understanding the criteria first can waste time and may result in unnecessary credit searches.
A more structured approach is to establish how your income is made up, review the available evidence and then identify lenders whose published criteria are potentially compatible with your circumstances.
How TLA Finance can help
TLA Finance works with self-employed applicants, sole traders and company directors whose income does not always fit a standard employed-income model. We can review how your income is structured, the accounts or tax documents available and the wider circumstances before looking at appropriate mortgage options.
You can read more about our mortgages for self-employed applicants and company directors, or contact TLA Finance to discuss your circumstances.
Important: Mortgage availability and lender criteria can change. Your home may be repossessed if you do not keep up repayments on your mortgage. This article is general information and is not a personal mortgage recommendation.
