Self-employed and thinking about a mortgage? The paperwork to get in order

There is a piece of folklore that being self-employed makes getting a mortgage hard. It is worth replacing with something more accurate, because the accurate version is far more useful.

Being self-employed does not make a mortgage hard. It makes the evidence different. An employed applicant proves their income with three payslips. You prove yours another way, and the whole difference lies in having that other way in order before you need it.

What tends to be asked for

Different lenders ask for different combinations, so treat this as the categories rather than a checklist:

• Your tax calculations and tax year overviews, which come from HMRC and show what you declared.
• Accounts prepared by an accountant, usually for the last two years.
• Business and personal bank statements, generally the recent months.
• The usual identification and proof of address.

Whether a lender wants the accounts, the HMRC figures, or both, varies. That variation is not an obstacle; it is one of the things advice is for.

Trading history, and what lenders are really asking

Lenders generally want to see a period of trading behind you. It is easy to read that as bureaucratic caution, but the underlying question is reasonable: is this income durable?

Which is why the trend across years matters more than the best year. A business that earned less last year than the year before tells a different story from one that earned more, even if the two averages match. Nobody is looking for a single impressive figure.

The two situations people worry about most

"I have only been self-employed a short while." Common, and lenders differ considerably in how they approach it. It changes which lenders are worth approaching rather than ending the conversation, and it is precisely the situation where going to one high street bank and being turned down tells you almost nothing useful.

"One of my years was much worse than the others." Also common. What helps is being able to explain it, briefly and factually, rather than hoping nobody notices. A bad year with a clear reason reads quite differently from a bad year with no account of itself.

Neither of those is fatal, and we are not going to promise you an outcome on either. What we can say is that both are ordinary and both are worth advice.

What genuinely helps, done early

This is the part worth acting on now, whether you are buying next spring or in three years.

Keep the accountant's figures and HMRC's figures in step. Where they disagree, somebody will ask, and it is much better answered in advance.

File on time rather than at the deadline. Recently filed figures are simply easier to evidence than ones still in progress.

Keep business and personal spending separate. Untangling a single account that does both is slow, and it makes an assessor's job harder than it needs to be.

Know your own numbers before the appointment. Not to the penny. But an applicant who can say roughly what they turned over, what they drew, and what was left is in a much stronger position than one who has to look it up.

Where we fit

JB Partners sits alongside MCC Partners, a firm of accountants, which means the accounts and the mortgage advice come from the same place. There is no gap between what was filed and what gets presented, and no game of telephone between two firms who have never spoken.

For a sole trader with straightforward figures that matters less. For anybody whose income is genuinely awkward to describe, it matters a good deal.

What we will not do

We are not going to advise you on tax, on your drawings, or on when to declare anything. That is an accountant's work and it depends entirely on your circumstances. And you will find nothing here about timing your accounts or presenting figures to improve an application: your figures are your figures.

The useful next step

Have the conversation before you need it, with whatever paperwork you have. The initial consultation is free of charge and without obligation, and if the honest answer is "come back in six months having done these two things", we will say so.

We have also written about what to bring to a first appointment, which covers this from the other end.

We are in Gravesend, and you will speak to the same adviser throughout.

Your home/property may be repossessed if you do not keep up repayments on a mortgage or other debt secured on it.

There may be a fee for mortgage advice. The precise amount of the fee will depend upon your circumstances.