Tax season often brings questions for self-employed borrowers, particularly around how submitting a tax return might affect a mortgage application. We regularly speak to sole traders and limited company directors who worry that finalising their figures could limit how much they can borrow, or delay their plans altogether.

In reality, mortgage lenders do not all assess self-employed income in the same way. Understanding how taxable income is interpreted can make a meaningful difference, especially at this time of year when figures are being confirmed.

At Fox Davidson, supporting self-employed applicants through lender income assessments is a core part of what we do, particularly during tax season when uncertainty tends to peak.

How Mortgage Lenders Look at Self-Employed Income

When reviewing a mortgage application, lenders are primarily looking for evidence that income is sustainable. For self-employed applicants, this usually means using figures taken from tax documentation, but the exact approach depends on how you trade.

This distinction often causes concern during tax season, especially if profits have fluctuated or income is structured across different sources.

Sole Traders: Net Profit Is Typically Used

For sole traders, lenders will usually assess income based on net profit, as shown on the tax calculation (SA302) and tax year overview.

Net profit reflects income after allowable business expenses, and this is the figure most lenders rely on when assessing affordability, rather than turnover.

This can be unsettling if:

• Expenses have increased in the most recent tax year
• Profit is lower than expected
• The figures feel out of step with actual cash flow

While this approach is common, it does not mean all lenders will reach the same conclusion from the same figures.

Limited Company Directors: Income Is Viewed Differently

For limited company directors, income assessment is more varied, and this is where lender choice becomes particularly important.

Many lenders will assess income using:

• Director’s salary plus dividends, as shown on the personal tax return, or
• Director’s salary plus share of company net profit after tax

However, there are also lenders who can assess income using:

• Director’s salary plus share of company profit before tax

This can be particularly relevant during tax season if profits have been retained within the business rather than taken as dividends. In some cases, this approach allows income to be assessed in a way that more accurately reflects how the business is performing.

This type of assessment is commonly considered when reviewing self-employed mortgage applications, particularly for company directors with established trading histories.

Why Tax Season Often Triggers Mortgage Concerns

As tax returns are prepared and submitted, many self-employed applicants worry that their updated figures could restrict their mortgage options. In practice, the outcome often depends less on the figures themselves and more on how they are interpreted.

Different lenders apply different rules to the same tax documentation. A single set of accounts can lead to very different affordability outcomes depending on which lender is assessing them.

This is why income concerns often surface at this time of year, particularly for applicants who are planning to move, remortgage, or apply shortly after submitting a return.

Lender Criteria Matters More Than Most People Realise

High street lenders often apply more rigid criteria when assessing taxable income, while specialist lenders may take a broader view, especially for limited company directors.

Income is assessed in context, taking into account how lenders interpret tax calculations rather than relying on a single standardised approach. This allows applications to reflect how self-employed income is structured, rather than how it appears in isolation.

This approach is particularly relevant during tax season, when decisions are often made quickly and without the benefit of wider lender comparison.

What to Read Next

Tax season often raises more than one question for self-employed borrowers. The following topics explore related areas that frequently affect mortgage outcomes:

• How timing your tax return can influence borrowing potential
• How lenders use income averages, and when they may not 

Both build on how lenders assess income and how recent figures are treated.

Speak to an Adviser About Your Income Figures

If you’re unsure how your latest tax return will be viewed by mortgage lenders, a conversation before applying can help clarify what options are available.

At Fox Davidson, we regularly work with self-employed clients at this stage of the process, helping them understand how lender criteria applies to their specific income structure.

If you’d like to discuss your situation, you can contact the team.