Which income figure is used?
For a sole trader, lenders commonly work from the profit declared for tax. Turnover is not personal income because business costs must be deducted first.
The calculation is usually supported by SA302 tax calculations, Tax Year Overviews and sometimes accounts.
What happens when profit changes?
A rising profit can be treated differently across lenders. Some average two years, some use the latest year and others remain cautious if the increase is sharp. Where profit has fallen, the reason and most recent position become important.
Documents to prepare
Having consistent evidence can prevent delays and help spot issues before submission.
- SA302 tax calculations
- Matching Tax Year Overviews
- Business accounts if available
- Personal and business bank statements
- Evidence of deposit and regular commitments
Planning before the next tax return
It is sensible to discuss mortgage plans with both your accountant and mortgage adviser before making decisions that materially change declared profit. Mortgage advice and tax advice serve different purposes and should be considered together.
Frequently asked questions
Is turnover used for affordability?+
Usually no. Sole-trader affordability is generally based on declared profit, although exact lender evidence varies.
Can the latest year be used?+
Some lenders may use it, particularly where the business has grown, while others average or use the lower figure.
Do I need business bank statements?+
They are commonly requested, especially for a shorter trading history or where the accounts need further context.