Self-Employed Mortgage Calculator

Yes, you absolutely can. It can be more difficult than if you’re full-time employed, but you can still get a mortgage if you’re self-employed. 

If you’re full-time employed, lenders usually ask for just three month’s worth of payslips to prove your income. But if you’re self-employed, most lenders ask to see three year’s worth of your accounts to prove your income. 

If you’re self-employed, it’s always a good idea to get a specialist mortgage broker, someone who has a proven track record of getting a mortgage for people in the same position as you. They’ll have the experience and the knowledge of which specialist lenders to approach to get you the right mortgage. 

Read our Self-Employed Mortgage Guide for lots of info on how being self-employed affects your mortgage application and what to do.

Being self-employed means you’ll have to prove your income differently to full-time employed people applying for a mortgage. Often, you’ll need to give your broker or lender more details of your income. You’ll have to show you can afford a mortgage by giving as much proof of your income as you can. That usually includes:

• Company accounts

• SA302

• Tax returns – a SA202

• Tax year overview

• Company accounts

• Reference from your accountant 

Full-time employed people can just give three month’s worth of payslips and their bank statements, which is a bit easier and less documentation than self-employed people.

This will depend on a few different things:

• your income

• your outgoings

• your credit history

• the kind of property you want to buy. 

You shouldn’t be able to borrow any less if you’re self-employed compared to if you’re full-time employed. 

Lenders work out how much they’re willing to lend to you by doing an affordability check. This is when they look at your bank statements and your credit history to see what your income is, your outgoings and if you have any past credit issues or debts.

1. Work out how much the total amount you earned in the assessment period

2. Subtract any permitted expenses – this is money you had to pay in order to run your business

3. Subtract money you have put aside for taxes and national insurance

4. Deduct money you have paid towards your private pension

5. Deduct losses from previous assessment periods

When you’re self-employed, you will pay income tax on your profits. People who are employed by someone else, pay taxes on their total income.

Work out your profits by subtracting your business expenses from your total income. The rate you will pay depends on the tax band you are in.

Remember, the rate is only applied to the profit between the brackets, not your whole profit. So, assuming you take the full standard personal allowance, if your profit is £60,000 then this is what you will pay:

• Zero tax on £12, 500

• 20% tax on £37,500 (This is the difference between £12,500 and £50,000)

• 40% on tax on £10,000 (This is the amount over £50,000)

If you’re self-employed, and all your income is taxed through self-assessment then you will not have a tax code. If you are employed as well as self-employed e.g you have a full-time job and freelance, then you’ll have a tax code.

There isn’t a set amount of money for you to earn before going self-employed. It depends how much you’re earning and how much money you need for your outgoings.

If you’re self-employed, you’re entitled to a tax-free personal allowance before you start getting charged tax. The standard personal allowance for the 2020/21 tax year is  £12,500. 

If you have more than one job and one is self-employed, you still only get one personal allowance. Your personal allowance is applied to what HMRC sees as your main employment. Typically, your personal allowance is applied to the job paying the most.

When you’re self-employed, it can be sometimes tricky to figure out your overall income and your profit. Unlike full-time employed people, you don’t have a fixed wage or hourly pay. It’s important for self-employed people to know how much they actually earn, especially when it comes to figuring out what your mortgage payments are likely to be.

A self-employed mortgage calculator uses the information you put in to calculate what your mortgage repayments might be based on your income. When you use a self-employed mortgage calculator, you’ll usually be asked to put how much you get paid, your pension contribution and the business expenses to work out your affordability, and what your repayments are likely to be.

You don’t have to have a pension as a self-employed person but it’s a good idea. According to a survey by National Employment Savings Trust (Nest), only 24% of self-employed people are actively saving into a pension.  

Pensions exist because generally people tend not to save enough for their older years. It’s a good idea to have a pension as a self-employed person because you might want to stop working at a certain time, and pension payments can help you live comfortably after you retire.

Most self-employed people prefer to use a personal pension. A personal pension is one you organise yourself, rather than a state pension, which you’d only be eligible for if you were born before 1953.

A personal pension gives you the freedom of choosing where you want your contributions to be invested and you have a choice from a range of funds offered to you by the provider. The provider will claim tax relief at the basic rate of tax (20%) for you and will add it to your pension pot.

How much you get back will depend on how much is paid into your pension and how well your savings perform and the level of charges you pay.

The three types of personal pension are:

• Ordinary personal pensions

  •  These are offered by most of the large pension providers and are easy to set up.

• Stakeholder pensions 

  • Stakeholder pensions have to meet minimum standards set by the government.

  • They have limited charges and can’t be more than 1.5% of the fund’s value for the first ten years and 1% after then.

  • They have low minimum contributions, and you can contribute as little as £20 per month.

  • They have flexible contributions, you can stop and start payments whenever you want and switch pension providers for free.

• Self-invested personal pensions 

  •  Self-invested personal pensions have a large range of investment options, but usually higher charges.

  • Self-invested personal pensions allow you to choose and manage your own investments.

  • Self-invested personal pensions tend to be more suitable for large funds. They are a good choice for experienced investors.