Mortgages for limited company directors
Salary and dividend, or salary and retained profit. The right lender treats your income properly, instead of stripping it down to a small PAYE salary.
Limited company directors typically take a small PAYE salary up to the National Insurance threshold and the rest as dividends. Some lenders only look at salary plus declared dividend, which understates your real income. Other lenders use share of net profit retained in the business, which often produces a much bigger borrowing figure. We pick a lender whose method matches how you actually run the company.
Who this is for
- You are a director and shareholder of a UK limited company.
- You take a low PAYE salary and the rest of your income as dividends.
- You retain profit in the business rather than drawing all of it.
- A high-street lender has produced a low borrowing figure that does not reflect your real position.
Limited company directors usually have two ways to be assessed. Salary plus declared dividend (the conservative method). Salary plus share of net profit, where the company retains some of its profit (the often more generous method). Knowing which lender uses which is the entire game.
Method one, salary plus dividend
Most high-street lenders look at your annual salary plus the dividend declared in the most recent one or two tax years. Two years of tax calculations (SA302) and tax year overviews are the usual evidence. This method works well if you draw most of the company profit, but understates the real position if you retain profit in the business for tax reasons.
Method two, salary plus share of net profit
A growing pool of lenders, often called the "specialist self-employed" tier, use your salary plus your shareholder percentage of the company net profit (post-corporation-tax). Two years of full company accounts and an accountant's reference are normally required. This method recognises retained profit as effectively yours, which can lift the borrowing figure substantially.
Worked example
Salary £12,570 plus dividends £30,000 plus retained profit £40,000 in a 100% shareholding. Method one gives a borrowing-relevant income of £42,570. Method two gives £82,570 (salary plus dividend plus retained profit, share-weighted). On a 4.5x multiple, that is £191,565 versus £371,565. Same director, same company.
One-year-accounts directors
A small group of lenders accept directors with only one full set of company accounts, especially where your previous employment income in the same field is well-documented. Pricing is slightly higher and underwriting deeper, but the case is placeable.
Common pitfalls
Filing accounts late or missing Companies House deadlines is a red flag at underwriting. Drawing dividends so aggressively that the company runs at a loss undermines method two. Being a minority shareholder (under 25%) often forces you back onto method one regardless. We model the case both ways before submitting so you know which lender you are walking into.
How Major Money Matters helps
Specific things we do for this case type. No generic platitudes.
Pick the right method, then the right lender
Salary plus dividend, or salary plus share of retained profit. We choose a lender whose method matches how the company is actually run.
Get the accounts pack lender-ready
Two years of full accounts, accountant reference, SA302 and tax year overviews. We brief your accountant on exactly what is needed.
Model retained profit
For directors who run lean dividends, retained profit can lift borrowing materially. We tell you which lenders count it.
Handle minority shareholding cases
Sub-25% shareholdings, multi-director structures, and recent share restructures all need careful lender selection. We have seen each.
Frequently asked questions
Do lenders use salary plus dividend, or salary plus retained profit?
Both, depending on the lender. High-street lenders typically use salary plus declared dividend. A growing specialist tier uses salary plus share of company net profit, which often produces a much bigger borrowing figure for directors who retain profit.
How many years of company accounts do I need?
Two years is the standard. A handful of lenders accept one full set of accounts, especially where your prior employment income in the same field supports the case. Three years opens the broadest range and often the most suitable rates.
I am a 50% shareholder with my spouse. Does that matter?
Yes. Lenders apportion the share of net profit to your shareholding percentage, so a 50% shareholder gets credited with half. We make sure both directors are presented on the right lender if you are buying jointly.
What documents will I need?
Two years of full company accounts, an accountant's reference, two years of personal SA302 and tax year overviews, three months of business and personal bank statements, photo ID, and proof of address.
Will retained profit reduce my borrowing if I drew it as dividends?
No. Retained profit only counts on lenders who use the salary-plus-net-profit method. It does not reduce dividends declared in prior tax years.
Related
Closest siblings to this scenario. Worth a read.
Mortgages for company directors paid through PAYE
PAYE-paid directors are assessed as employed. Bonuses, RSUs and share schemes need careful packaging.
Read moreMortgages with two years of accounts
Mainstream lender pool, often the most suitable rates. Choice of method (average, lower-of-two, latest year).
Read moreHow self-employed income is calculated
The technical breakdown of the methods lenders use, and why the same person gets different borrowing answers.
Read moreWhat our clients say
Real reviews from clients across Romford and Essex, verified on Google.
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Talk to a limited-company director specialist
A quick 15-minute call tells you whether method one or method two suits you, and which lender will fund the bigger number.
Named adviser, wherever possible. No call centre. We aim to return your call as quickly as we can. Mon to Fri 9am to 5pm, weekend appointments on request.