Limited company director mortgage
UK lenders assess a limited company director in one of two ways: salary plus dividends drawn, or salary plus your share of the company's retained (net) profit. The two can produce very different incomes. If you leave profit in the company for tax reasons, a lender that uses retained profit may let you borrow far more than one that only counts dividends. Choosing the right method, and lender, is the key decision.
The two methods, side by side
| Method | Income the lender uses | Best when |
|---|---|---|
| Salary plus dividends | Director's salary plus dividends actually drawn in the year | You draw most of the profit as dividends |
| Salary plus retained profit | Director's salary plus your share of the company's net profit before dividends | You leave profit in the company and draw modest dividends |
Indicative comparison of how lenders treat director income. The exact treatment varies by lender.
Why this matters so much
Tax-efficient directors often pay themselves a small salary, draw modest dividends, and leave the rest in the company. That is sensible for tax, but on a salary-plus-dividends assessment it makes you look low-income. A lender that uses retained profit sees the full picture. For a profitable company that distributes little, switching to a retained-profit lender can be the difference between being declined and borrowing comfortably.
What lenders check
- Your shareholding, to confirm you are treated as a director rather than an employee.
- Two to three years of company accounts (some accept one year).
- That retained profit is genuine and sustainable, not a one-off year.
- Your personal tax position via SA302 and tax-year overviews.
Common questions
How do lenders assess a company director?
Most use your salary plus the dividends you have drawn. A smaller, important group of lenders instead use your salary plus your share of the company's retained (net) profit. Which method a lender uses can change your usable income, and therefore your maximum loan, significantly.
What is the retained profit method and why does it matter?
Many directors leave profit in the company for tax efficiency rather than drawing it all as dividends. On a salary-plus-dividends basis, that retained profit is invisible to the lender. On a salary-plus-retained-profit basis, it counts. For a profitable company that distributes little, the second method can roughly double the income a lender will use.
How much shareholding do I need?
Lenders usually apply the director or self-employed rules once you hold a material stake, commonly 20% to 25% or more. Below that you may be treated as employed on your salary. The exact threshold varies by lender.
What documents are needed?
Typically two to three years of company accounts and your personal SA302 tax calculations and tax-year overviews, plus business and personal bank statements. Lenders using retained profit will look closely at the accounts to confirm the profit is real and sustainable.
Founder, MortgageExplained, MortgageExplained
Adam spent nearly a decade as a mortgage adviser at Just Mortgages, with further experience in commercial finance. He is CeMAP and CF qualified. He built MortgageExplained to do one thing well: explain mortgages in plain English, then introduce you to a regulated broker when you are ready. Every page is written and reviewed by Adam.
Last reviewed: 29 June 2026