The world of work is changing. As a self-employed professional, a contractor, a freelancer, or a Limited Company Director, you represent the modern backbone of the UK economy. You are dynamic, resourceful, and often, highly successful. Yet, when it comes to the monumental task of securing a mortgage, you often find yourself hitting a frustrating, archaic roadblock.
That roadblock is the traditional lender’s obsession with a P60 and 3 months worth of payslips.
For many of the high street banks, the P60 is the gold standard of income verification-a single, clean document proving your earnings and tax payments for the previous year. But for you, the self-employed specialist, the P60 is irrelevant. You don’t have one.
This perceived lack of ‘standard’ paperwork can feel like an automatic rejection before you’ve even started. It can make the crucial step of getting pre-approved for a mortgage-the Agreement in Principle (AIP)-feel impossible.
At Friends Capital Mortgage Specialists, we understand this challenge. We don't just facilitate mortgages; we specialise in them. This in-depth guide is designed to empower you with the knowledge to navigate the complex landscape of Self employed Mortgages, proving to lenders that your income is sustainable, secure, and ready to back your new home.
To truly master the self-employed mortgage process, you must first understand why the P60 is a non-starter and what the lender is actually trying to establish.
A P60 is a statement issued to Pay As You Earn (PAYE) employees, summarising the total salary and tax paid over a tax year.
Your financial picture is inherently more complex. You have variable income, business expenses, and strategic tax planning (all perfectly legal and sensible) that reduces your taxable profit but doesn't necessarily reflect your true affordability.
When a high street lender, operating on rigid, algorithmic criteria, demands a P60, they are essentially asking for a simple answer to a complicated question. As a specialist home buyer, you need a specialist answer. The solution lies in providing the correct, comprehensive alternative documentation that proves two things:
This is where the distinction between PAYE lending and Self employed Mortgages becomes critical. We must look beyond the P60 to the documents that truly matter.
The documents required will depend entirely on your business structure. Understanding which set of accounts applies to you is the first and most vital step toward securing a pre-approval.
If you operate as a sole trader or are in a partnership, the documentation that replaces the P60 is your official tax return history.
The Role of the SA302 and TYO
Crucial Point on Consistency: Most UK lenders require two years of filed SA302s and TYOs to establish a track record of consistent income. If you have less than two years of trading history, your options narrow, but a specialist broker, working with bespoke lenders, can often find solutions, sometimes based on just one year of accounts plus proof of prior experience in the same field.
What Lenders Look At:
For directors of Limited Companies, the situation is more nuanced. Your income is typically taken as a combination of a small salary (often covered by the PAYE allowance) and dividends.
Traditional lenders will usually only consider the extracted income—that is, the total of the salary and dividends you have physically taken out of the company. However, for a specialist lender, this is often insufficient, as many directors strategically keep profits retained within the company for tax or investment purposes.
A true specialist lender, working on a manual underwriting basis, will often be willing to look at the company’s Total Profit before Tax (or ‘Share of Net Profit’). This practice is transforming Self employed Mortgages.
One-Year Accounts for Limited Companies: If your company has been trading for just one year, it is difficult but not impossible to obtain an AIP. A specialist broker is essential here, as they know the small handful of lenders willing to consider this, often requiring significant cash reserves, low LTV (Loan-to-Value), and a strong business plan forecast.
The Agreement in Principle (AIP), also known as a Decision in Principle (DIP), is the all-important initial step. It is a formal, but non-binding, document stating that a lender is, in principle, willing to lend you a certain amount based on the initial information provided.
For the self-employed, getting a robust AIP is crucial, as it gives you confidence when making an offer and reassures estate agents of your purchasing power. Crucially, a self-employed AIP is more detailed and subject to more scrutiny than a PAYE one, which is why working with a specialist is key.
Do not guess your income. Before applying for an AIP, you and your accountant (or your mortgage adviser) must calculate your assessable income based on the lender’s criteria. If the lender uses a two-year average net profit of £55,000, that is the figure you must use, not your current month’s projected income. An inaccurate estimate here will cause your full application to fail later.
Before the AIP application, have your core documents ready and certified:
A specialist adviser, such as those at Friends Capital, will take your prepared figures and package them to the right lender. They will fill in the AIP application, ensuring the details on your business structure and income are clearly presented. This is where the adviser's knowledge of bespoke underwriting criteria prevents the application from being auto-rejected by a computer algorithm.
An AIP usually involves a credit check. For a self-employed person, a clean credit file is even more important than for a PAYE applicant, as the lender has to manually justify the risk. Ensure you are on the Electoral Register and that all credit commitments are managed properly. This is not the time for late payments.
If the AIP is successful, you will receive the document stating the maximum loan amount. This document is a powerful tool in the housing market, confirming your ability to borrow, subject only to a valuation of the property and the final, detailed underwriting of your paperwork.
The difference between a High Street Bank and a Specialist Lender can be the difference between rejection and acceptance for Self employed Mortgages.
Most major high street lenders prefer simplicity. They use a strict, automated, 'tick-box' system. If your documentation doesn’t fit their rigid criteria—for example, if they only consider extracted salary and dividends, or if you only have 18 months of trading—the application is automatically flagged or rejected. Their reliance on algorithms means they cannot appreciate the nuances of a successful, growing business.
Specialist lenders exist because the UK mortgage market has complex needs. They employ manual underwriters—experienced human beings who are trained to assess risk on a case-by-case basis.
Specialist Flexibility Includes:
By using a specialist lender, you are engaging a partner that sees your business not as a risk factor, but as a viable, sustainable enterprise. However, finding these lenders and knowing their specific criteria is not public knowledge—it is the domain of the specialist adviser.
Beyond the core documentation, there are several actions you can take to strengthen your self-employed mortgage application and maximise your borrowing power.
Your accountant and your mortgage adviser must be on the same page. Your accountant's primary goal is often to minimise your tax liability, which means reducing your declared taxable profit. Your mortgage adviser's primary goal is to maximise your assessable income for lending purposes. These two goals are fundamentally in conflict. You need open communication to ensure your end-of-year tax returns strike the right balance between tax efficiency and mortgage eligibility.
The longer you have been trading, the easier your application will be. Aim for at least two full tax years. If you have recently switched from sole trader to Limited Company, ensure your adviser can provide evidence of the continuity of your work; some lenders are happy to bridge the gap and treat the period as continuous trading.
As a self-employed applicant, having a larger deposit will always be beneficial. A smaller Loan-to-Value (LTV) reduces the lender’s risk and often unlocks more favourable interest rates. Whilst 90% LTV mortgages (10% deposit) are available, applications with 85% LTV or lower (15% deposit or more) are generally viewed more favourably by specialist Self employed Mortgages underwriters.
Ensure your personal finances are impeccable in the run-up to your application.
Navigating the intricacies of Self employed Mortgages without a P60 is a practice in specialist knowledge. You cannot rely on comparison sites or general high street advice.
Friends Capital Mortgage Specialists who work exclusively within this complex space. Our value to you is not simply in finding a mortgage, but in:
Your success as a self-employed professional is based on your expertise. When it comes to the biggest financial decision of your life, you need an equally specialised approach.
The P60 is a document of the past. Your income, your business, and your future are not.
Don't let rigid lending criteria be the roadblock to your new home. Whether you are a newly established Limited Company Director or a long-standing Sole Trader, we have the expertise to unlock the best Self employed Mortgages solution for your unique circumstances.
Take the next step and secure your robust pre-approval.