Self employed applicants

We’ve made changes to our self employed lending criteria to ensure our treatment of self employed income is clear and straightforward. Details below:

Latest year’s income evidence must be no older than 18 months on all cases.
Applicants must have been trading for at least 2 years and provide 2 years finalised figures to evidence income (for limited company director with more than 25% shareholding we will use business year figures, not the tax year).
Affordability is based on average income over the last 2 years if the latest year has increased, or the latest year if average income has decreased.
Our maximum loan to income multiple for self employed applicants is 4.49 and we have a range of products available up to 95% LTV.

Acceptable Self employed applicants:

Applicants who do not meet the criteria below will be treated as employed customers

- Applicants must have been trading for at least 2 years and provide 2 years finalised figures to evidence income
- We will accept net profit for sole traders and share of net profit for partners in a partnership or LLP
Required income evidence:
- 2 years tax calculations and corresponding tax year overviews or accountant’s reference
- We don’t have a minimum experience period and we accept future income up to 3 months.
- Affordability will be evidenced as per our employed policy.
- If the applicant is in receipt of dividends, affordability will be evidenced as per our self employed policy.
- Applicants must have been trading for at least 2 years and provide 2 years finalised figures to evidence income (Business year figures are used, not the tax year)
- Affordability is based on salary and dividends
- If joint applicants own 25% or more between them, treat both as self-employed (both applicants need to hold a % share)
- An accountant’s reference is required to evidence income
- If dividends exceed share of net profit, the application will be manually reviewed by our underwriting team
- Day rate contractors that do not meet our policy criteria (Contractors | TSB Intermediaries) will be treated as self-employed

Change to a Company Situation:

When a company situation changes e.g. sole trader to partnership, partnership to limited company or partnership to sole trader etc. as long as the applicant remains in the same business, then it is acceptable to key as continuous employment. The original start date must be entered onto Mortgage Pro and not the date the company changed status. Where the ownership structure of the business has changed, the latest two years finalised figures will be required.

Where the customer has gone from a Sole Trader to LTD company:

You will need to select the customer as 'LTD company'.
Key the customers salary and dividends in the relevant fields for the relevant years.
For previous 'Sole Trader' years, key the 'Net Profit' into the 'Salary' field.

The income we will use for affordability is as follows:

Net profit for Sole Traders.
Share of net profit for Partnerships.
Salary & dividends for Directors of Limited companies.

We require 2 years income documentation for self employed applicants.

Where 2 years income has not been captured for affordability cases will automatically be declined.

Affordability for self employed applicants is calculated as follows:

Average of last 2 years where income has increased in latest year.
Latest year where income has decreased in latest year.

If the applicant has been self employed for less than 2 years, please enter '0' into the income fields.

If any of the following criteria apply, the customer must be keyed as self employed.

Where the applicant has a shareholding of 25% or more.
If joint application and applicants have a collective shareholding of 25% or more, then both applicants are to be treated as self employed (both applicants need to hold a % share).
A sub-contractor who derives income from more than one contract.
An applicant has a partnership interest in a business, i.e. income is not PAYE, irrespective of the percentage shareholding.
An applicant owns a franchise.
An applicant employed by a Private Limited Company (LTD) or Limited Liability Partnership (LLP) who receives a salary (PAYE) and dividends as part of their remuneration package and / or Net Profits.

For full information on the different types of income accepted for self employed applicants please see income section:

Income verification documentation

Acceptable documentation