It's one of the most common frustrations we hear from limited company directors: you've built a profitable business, but a mainstream lender's affordability calculator only wants to know about your salary and dividends. If you run your finances tax-efficiently — taking a low salary and leaving profit in the company — that can leave your "provable" income looking far smaller than your business actually generates. The good news is that a number of lenders take a broader view. Knowing which ones, and how their calculations work, is where a broker earns their fee.
The starting point: salary and dividends
Most lenders begin with a simple combination: your annual director's salary plus dividends drawn from the company, usually averaged or taken from the latest year, evidenced through your accounts, SA302s and tax year overviews. For many directors this is a perfectly workable figure. The complication arises when you've deliberately kept dividends low to manage your personal tax position — in which case this starting point may understate what you can genuinely afford.
Retained profit: the option most brokers don't mention
A number of lenders will go further and consider your share of the company's retained profit (profit left in the business after corporation tax, rather than drawn out as dividends) as part of affordability — but the rules differ significantly between them, and this is genuinely one of the more complex areas of specialist lending.
Worth being precise here: this isn't the accumulated reserves sitting on your balance sheet from previous years — it's your Profit After Tax (PAT) for the year, or years, being assessed, whether that's the latest year alone or a three-year average. Historic reserves built up years ago generally aren't what's being measured.
As a worked example of how one high-street lender structures this: retained profit can only be considered where the applicant is a majority shareholder (over 50%), and only above certain loan size thresholds — in this lender's case, £700k for residential or £600k for buy-to-let. Below those thresholds, the assessment reverts to salary and dividends only. Where it does apply, the amount of profit used is capped at the lower of the three-year average or the latest year's figure, and is then scaled to your percentage shareholding — a 70% shareholder can have a maximum of 70% of that profit considered.
Other lenders take a different view entirely. Some will treat any director holding more than 25% of the company as effectively self-employed for underwriting purposes, and for majority shareholders will add a share of the most recent year's net profit on top of salary — a combined salary-plus-profit-share figure, rather than the salary-and-dividends-only starting point, and without the same loan-size threshold some lenders apply to retained profit. The point isn't that one approach is better; it's that they're genuinely different, and which one suits you depends on your shareholding, your loan size, and how your profit has trended over the last few years.
Add-backs: items that can boost your figure further
A number of lenders will also allow certain company expenses to be added back to profit before it's assessed — on the basis that these are costs benefiting you personally rather than the operating business. Commonly accepted add-backs include:
- Directors' pension contributions
- Directors' car allowance
- Use of home as an office
- Private health insurance premiums
This isn't universal — some lenders only allow it where you own 100% of the company, and finalised accounts are usually required to support any add-back. But for directors who run their finances efficiently, it can meaningfully increase the income figure a lender is willing to use. We go into this in more depth in our guide to profit add-backs.
Director's loans matter too. If you've taken a loan from the company that will still be outstanding when your mortgage completes, most lenders that assess retained profit will also factor this in as a monthly commitment — typically calculated as a small percentage of the outstanding balance, evidenced by an accountant's letter, and divided across the year. It's easy to overlook, but it can meaningfully affect affordability.
What documentation will you need?
- Two years of certified accounts (which between them should cover a minimum three-year trading history for retained profit assessments)
- SA302s and tax year overviews, or an accountant's reference on the lender's standard format
- Confirmation of your percentage shareholding
- An accountant's letter confirming any outstanding director's loan, where applicable
Lenders are typically strict about who can provide this evidence — many maintain an approved list of accountancy body qualifications, so it's worth checking your accountant's credentials meet the requirements of whichever lender ends up being the best fit.
Why this is a case for whole-of-market advice
With this much variation between lenders — different shareholding thresholds, different loan-size cut-offs, different treatment of director's loans — going direct to your business bank account provider is rarely the route to the largest, cheapest mortgage available to you. An independent broker can map your shareholding, retained profit history and loan size against the lenders most likely to say yes, and at the best rate for your circumstances.
Tell us your shareholding, how your accounts are structured, and what you're looking to borrow — we'll tell you which lenders actually fit. Call 01277 564 054 or send a message.
Talk to an AdviserFAQs
Most lenders start with your salary and dividends. A number will also consider a share of the company's net or retained profit, particularly if you're a majority shareholder, which can significantly increase how much you can borrow.
It depends on the lender. Many require you to own more than 50% before retained profit can be considered, while others treat any director owning more than 25% differently for assessment purposes.
Yes, with some lenders. This is your Profit After Tax (PAT) for the year or years being assessed, not the accumulated reserves on your balance sheet. It's usually capped — for example the lower of a three-year average or the latest year's figure — and scaled to your percentage shareholding.
No. Some only consider salary and dividends, others add a share of net profit on top of salary, and others factor in retained profit above certain loan sizes — which is exactly why whole-of-market advice makes a real difference here.
With some lenders, yes. Items such as pension contributions, car allowance, use of home as an office and private health insurance can sometimes be added back to profit, often where you own 100% of the company, supported by finalised accounts.