The complex income mortgage guide

Self-employed sole traders (people trading in their own name, not through a company) are underwritten on SA302s and Tax Year Overviews from HMRC. Most lenders take a two-year average of net profit (the figure after expenses but before personal tax). Some specialists will take latest year only where there is growth - useful for borrowers whose earnings have stepped up. A small group of lenders will lend on a single year of accounts where the borrower previously worked in the same sector as an employee.

The practical sequence is: gather two years of SA302s and tax overviews, gather two years of full accounts if you have an accountant, gather six months of business and personal bank statements. Run the numbers through three lenders' policies (we do this for you). Pick the one where the borrowing capacity is highest at acceptable pricing.

Most owner-managed business directors are underwritten on a combination of salary plus dividend. The salary is taken from the latest P60 or last six months of payslips. The dividend is taken from the latest two years of personal tax returns or dividend vouchers. The two are added together to arrive at gross income.

The problem with that approach is that many directors deliberately keep their dividend low to manage personal tax, retaining profit inside the company. A small but important group of specialist lenders (Kensington, Foundation, Vida, Cambridge BS, Aldermore, Hodge) will look at salary plus dividend plus an allowance for retained profit, or in some cases will underwrite directly on the company's net profit before tax. The lender pool for this approach is narrower but the borrowing capacity is typically 30-50% higher than vanilla salary-plus-dividend underwriting.

Where the company has changed structure recently (incorporation from sole trader, merger, change of directors) the lender will want to understand the trading history continuity. A clean trading line through the structural change is fine; a hard break is harder to underwrite.

Partners and members of LLPs (law firms, accountancy practices, surveying firms, medical partnerships, investment partnerships) are underwritten on their share of partnership profit. The evidence is typically the partnership's set of accounts plus the individual's K1-equivalent or accountant's reference confirming their profit share. Capital account drawings are accepted as income by several lenders even where the technical profit allocation is higher.

Newly made-up partners (partner for less than 12 months) present a particular underwriting challenge because they have no full year of partner profit. Several specialists handle this on the basis of the partnership agreement plus the firm's projected profit allocation, often with an accountant's letter confirming the deal. The lender pool is narrower but the case is workable.

Day rate contractors - IT, engineering, finance, medical - are underwritten by specialist contractor lenders on a gross annual income calculated as day rate x 5 days x 46 weeks (or x 48 with some lenders). A £700 day rate becomes a gross annual of £161,000 (x5 x46). The borrower needs at least 12 months of contracting history (sometimes less with relevant prior employment) and at least one current contract with 60+ days remaining at application.

Several lenders operate dedicated contractor products at near-mainstream pricing: Halifax, Clydesdale, Skipton BS, Kensington, Coventry BS for Intermediaries, Aldermore. The product is treated as standard residential, not as a sub-prime variant, provided the contracting history is clean.

Bonus income is widely accepted. The standard treatment is 50% of an average of the last two or three years of bonus, added to base salary. Several lenders will take 100% of bonus where the bonus has been consistent and the borrower works in a sector with regular bonus cycles (banking, asset management, big-tech, consulting). The lender pool for 100% bonus treatment includes HSBC, Coutts, Halifax (with conditions), Skipton and most specialist lenders.

RSU (Restricted Stock Unit) income is accepted by a smaller group, typically the private banks and a handful of specialists. The treatment is usually 50-100% of the value of RSUs vesting in the current and next 12 months, sometimes haircut for share price volatility on technology stocks. RSUs at FAANG and equivalent tier 1 tech employers are usually accepted at higher percentages than RSUs at less established issuers.

Carried interest from private equity and venture capital is a private bank conversation. Several private banks (Coutts, Investec, Hampden, JP Morgan, Citi) will lend against expected carried interest where the fund cycle and the borrower's allocation can be evidenced. The mainstream high-street will not engage with carry as income.

Major-currency salaries (USD, EUR, CHF, HKD, SGD, AED, AUD, NZD, CAD) are accepted by 15-20 UK lenders. The treatment varies. Some lenders apply no FX discount (often the private banks). Some apply 10-25% haircut to convert the foreign currency to sterling at a stressed exchange rate. Some lenders will underwrite the mortgage in the income currency rather than sterling, which removes FX risk for the borrower but limits the lender pool.

Smaller currencies (Russian Ruble, Brazilian Real, Indian Rupee, Chinese Yuan, Turkish Lira and most African and Latin American currencies) are accepted by a very small number of lenders, typically with substantial FX haircut. Some are not accepted at all.

Step one: gather everything. Two years SA302s, two years accounts, last six months payslips and P60, last six months personal and business bank statements, partnership accounts if relevant, contract evidence if contracting, bonus letters and RSU schedules. Step two: a 30-minute call with a broker to map the income against lender policies. Step three: indicative terms from three to five lenders, side by side. Step four: pick the right one, package the application, run it through to offer.

Doing this in the right order saves weeks of wasted application time. Complex income cases fall over most often not because the lender will not engage but because the borrower applied to the wrong lender first, received a decline, and then has to explain the prior decline to every subsequent lender. We screen the lender list before any credit-search is run.