If you work for yourself and hope to buy a home next year, tell your accountant before your next set of accounts is prepared. That early conversation can help you understand your income, plan for tax and have the right paperwork ready when you need it.
These are the questions to start with, whether you are buying your first home or planning a move.
How early should I start preparing?
As soon as buying becomes a realistic plan. Six to twelve months ahead is a useful planning target, although some circumstances need longer. You can speak to a mortgage adviser before you have chosen a property.
Many lenders ask for two or three years of income evidence, but some consider shorter trading histories. An early conversation helps establish what is possible with your records and what still needs preparing.
What should I discuss before my accounts are finalised?
Explain when you hope to buy, your likely budget and any planned business changes. Give your accountant complete, current records of income and expenses, and agree when your accounts and tax return can be ready.
Mention plans to change your salary or dividends, switch business structure or make a substantial business purchase. Your accountant can explain the tax and cash-flow effects, while your mortgage adviser checks the implications for a future application. Income and expenses must always be recorded accurately.
Which income figures should I understand?
For sole traders, lenders commonly look at profit after business expenses. Turnover alone will not tell you what you might be able to borrow. For company directors, some lenders use salary and dividends, while others can consider salary plus your share of company profit, subject to their criteria.
Ask your accountant to explain the figures in your own accounts. Then ask your mortgage adviser which figures prospective lenders could use. Taking extra dividends simply to support an application may be unnecessary and could create additional tax costs.
Which documents should I start collecting?
Your adviser should confirm the exact documents and years required. These may include:
Finalised accounts and recent business bank statements.
Tax calculations, often called SA302s, and the corresponding HMRC tax year overviews.
Personal bank statements and details of loans, credit cards and regular commitments.
Statements showing how your deposit has built up, plus any evidence needed for a gift.
A tax calculation shows how your tax was worked out; a tax year overview shows your tax position with HMRC. They are separate documents, and a lender may require both. Ask your accountant how to obtain them and allow time after filing for the records to update.
What if my profit has fallen or this year looks different?
Tell both advisers early and explain why. A one-off equipment purchase, a quieter trading period or a change in working hours may need supporting information. Keep the relevant records so your accountant can explain what happened.
A lender may use the latest lower income rather than an average. An explanation can help it understand the figures, but it does not guarantee that earlier or higher income will be accepted.
How do I keep my deposit plan realistic?
Ask your accountant what needs setting aside for tax, including any payments on account towards your next Self Assessment bill. Keep that money separate from your deposit plan and leave room for business running costs, buying fees and a financial buffer.
If the money is in a limited company, take advice before transferring it into your personal account. Salary, dividends and directors’ loans have different rules and tax consequences.
What can I do this month?
Book the conversation with your accountant, bring your bookkeeping up to date and review your household budget. Check your credit reports for errors and keep payments up to date. Speak to your mortgage adviser before taking on new personal borrowing.
At RH Mortgage & Financial Solutions, we can help you understand how lenders may assess your income and what evidence you need. With your permission, we can work alongside your accountant, so you have a practical plan before you start house hunting.
Mortgage eligibility depends on your circumstances, affordability and lender criteria. Take tax advice from your accountant.
Your home may be repossessed if you do not keep up repayments on your mortgage.