The rise in self-employment is reshaping the UK workforce. More than four million people and counting now work for themselves, representing around 12% of the labour market. While their income types may be diverse, their mortgage needs and income strength are often the same as any other borrower. But too often, self-employed clients face higher barriers when it comes to accessing finance.
This is rarely because of financial weakness. More commonly, it is the result of inflexible criteria. Many lenders still require two or three years’ accounts or tax calculations before they’re prepared to assess an application.
That is a problem for clients with just one trading year behind them, even if they are already carving out a successful business and career. Even applicants offering strong accountant projections and proof of sector experience can still be excluded, despite running stable, profitable businesses.
Manual expertise
This is where the difference between box-ticking and real underwriting becomes critical. For brokers working with clients who may be in their first or second year of trading, a lender assessing each case individually can make all the difference. A manual approach means real people reviewing applications and understanding how the business works, rather than relying solely on automated scoring or arbitrary thresholds.
It is important to remember self-employment takes many forms. The term can apply to a freelance designer, a seasoned contractor, a professional sportsperson, or the director of a growing limited company. Each of these professionals has a different way of earning and structuring their income. Some receive dividends, others are paid on day rates, some may have short-term contracts, while others rely on a combination of salary and net profit.
Where there is one year of strong accounts and a clear outlook for continued income that should be enough for a lender to start listening. Coupled with the willingness to lend an enhanced affordability calculation of up to 5.5 times income, this could also help clients reach their goals.
Other lenders might welcome applications from self-employed clients armed with a strong income outlook but struggle with paperwork like income projections due to less than one year’s trading or just a single year’s accounts.
It’s easier to lend if projections from a qualified accountant can support the growth story and the applicant brings relevant sectoral experience to the table. This makes it perfectly reasonable to assess the case on its individual merits.
A further advantage comes from income flexibility. For many self-employed clients, affordability is not limited to a single revenue stream. Good lenders, like ourselves, are now offering policies that allow for a mix of income sources to be considered, provided they are regular, provable, and sustainable.
Lodger income up to the Government’s tax-free threshold is a prime example. Others may include investment income, commission, bonuses, overtime, or even ‘second jobs’. These options matter, particularly when standard salary-based assessments fall short.
Professional underwriting
This kind of flexibility is only useful when backed by thoughtful and consistent underwriting. An underwriter’s role is to determine whether a client can afford a mortgage today and into the future. That does not necessarily require a rigid checklist. It requires evidence the business is thriving and will continue to do so. Well-packaged applications are crucial in this context. A detailed fact find, clear income explanation, and supporting documentation will always help provide the confidence needed to approve the case.
For brokers, this is both a responsibility and an opportunity. Understanding how to present self-employed cases effectively not only helps the client but also strengthens relationships with lenders who value high-quality submissions. A broker who understands how to navigate more complex income scenarios adds real value, especially when the case falls outside ‘standard lending’.
A changing world
As more people move into self-employment and entrepreneurial roles, lenders and brokers alike must keep pace. The traditional model of employment is changing and the industry cannot afford to treat these applicants as higher risk simply because their incomings or pay slips look different.
Self-employed clients are often highly motivated, financially savvy, and determined to succeed. Many are in growth mode, having built resilient businesses through skill and determination. They deserve access to mortgage products that reflect the strength of their position.
Specialist self-employed lenders understand this. They offer criteria that consider real-world income and use experienced underwriters to assess each case.
Brokers who partner with lenders such as Hinckley & Rugby, and who invest in understanding the nuances of self-employed income, will be well placed to serve this growing segment.
With the right approach and strong broker-lender collaboration, thriving new business owners will be able to access the mortgage choice they deserve.
Laura Sneddon is head of sales and distribution at Hinckley & Rugby for Intermediaries
