Mortgage as a Sole Trader

Can I get a mortgage if I’m a sole trader?

Yes, definitely. Your income is as good as anyone else’s. There are certain caveats, which we’ll go through, but you definitely can get a mortgage as a sole trader.

How long do I need to be a sole trader before I can get a mortgage?

Most lenders, including the big high street names, want two years’ history – that’s the norm. Some might even want three.

However, a few lenders will look at you with just one year’s history. That’s the minimum – everyone wants one year. You can’t have six months and get a mortgage because you haven’t done your first year yet.

Sole traders normally work April to April, to fit in with the tax year. But you might not have started in April and it might therefore not be a full year. Perhaps you started in the summer, so your first year’s figures to April might be based on less than 12 months.

If they’re strong enough to get a mortgage, we could potentially approach some lenders at that point, because you’ve got one year’s figures.

We stand a better chance with some lenders if you’ve done a similar thing before. An employed electrician who goes self-employed is an example. If you earn a similar amount and you work for the same sorts of people, one year could be enough – even with some high street lenders. They will be comfortable that you know what you’re doing.

What documents do we need to prove income as a sole trader?

As a sole trader, you’ll do a tax return after April. Most people leave it until later in the year, as you don’t have to pay your tax until the following January. But you can do it straight away, when the tax year finishes.

You do your tax return and submit it to HMRC. You can then download a couple of documents. The first is called an SA302 or a tax calculation. It’s a summary of your income – how much you’ve earned that’s not taxable.

Any pay from employment will also be shown, plus interest from investments and dividends. All your income is on this tax calculation and it confirms how much tax is payable.

Then a document goes alongside that, called a tax year overview. That basically shows whether you’ve paid your tax or not.

As we record this, it’s May 2025. If you’ve already done your tax return, that’s nice and early. Your tax overview will probably still show that you owe your tax because you haven’t got to pay it until January. But your previous year’s tax overview should show that you had an amount owing and it’s all paid.

As well as those documents, we always need three months’ bank statements – both personal and business if you have separate accounts. We also need ID and proof of deposit.

How does the mortgage process differ between a sole trader and a limited company?

The process doesn’t differ at all. The application is looked at the same way by the same people. It’s just the documents that we need and how income is assessed that’s different.

A limited company director probably pays themself a small salary and then a dividend on top. That salary and dividend still show on the tax calculation, and the tax overview shows they’ve paid the tax.

We need the same information, but we’re just using different income. As sole trader, all the money that comes in is your turnover, then your expenses go out. What’s left is your net profit. And that’s the figure that we use if you’re a sole trader.

For a limited company director, those same things happen, but your company makes the profit and you pay yourself from that. It’s just a slightly different way of looking at it. The process and documents are similar.