Limited Company Director Mortgages on Retained-Profit Basis (UK 2026)
If you're a UK limited company director paying yourself a small salary and modest dividends to optimise personal tax, generalist lenders dramatically under-borrow you. Retained-profit assessment includes the profit you've left in the business as part of your assessed income - often 3-5x larger than salary + dividend alone.
Retained-profit assessment is lender-specific and accountant-evidenced. A specialist broker is essential to access this route. Your home may be repossessed if you do not keep up repayments on your mortgage.
The retained-profit advantage
Most UK limited company directors structure their income to minimise personal tax: small salary (around the NI secondary threshold £9,100), then dividends up to the dividend allowance and through the basic-rate band. Profit beyond that is left in the company - "retained earnings" - to be extracted later via dividends, pension, or other routes.
For mortgage purposes, this is a problem with generalist lenders. They look at the director's SA302 (personal tax return) showing £12k salary + £40k dividends = £52k income. They apply a 4.5x multiple = £234k borrowing capacity. The director's actual earning power - the £150k profit the business generates - is invisible to them.
Retained-profit assessment fixes this. Specialist lenders look at the company accounts and assess income as salary + retained profit (or some variant including dividends). The same director suddenly has £162k of assessed income, which at 4.5x = £729k borrowing capacity.
£495,000 swing in borrowing capacity on the same business, same person, same numbers.
Which lenders offer retained-profit assessment
- Halifax - established retained-profit route. Salary + dividends + percentage of retained profit. Requires accountant reference.
- Kensington - specialist; takes more complex cases; salary + net profit basis on some products.
- Aldermore - broker-led specialist; salary + net profit or salary + dividends + retained profit depending on product.
- Clydesdale Bank - established director route.
- Family Building Society - active in director self-employed cases.
- Saffron Building Society - specialist on case-by-case basis.
- Newbury Building Society - regional specialist.
Note: criteria change frequently. A broker who places director cases monthly maintains the live matrix. The wrong placement can mean a 60% smaller approval.
Eligibility requirements
- Director of a UK limited company.
- Typically 20%+ shareholding (some lenders require 25% or 50%+).
- Most recent 2 years of finalised company accounts (some specialists accept 1 year).
- Accountant reference required (ACA, ACCA, CIMA, FCCA, FCA, sometimes AAT).
- Company must be profitable for the most recent 2 finalised years.
- Personal SA302s and Tax Year Overviews.
- Personal bank statements (3 months).
- Business bank statements (3 months).
- Companies House profile showing directorship and shareholding.
How the calculation typically works
Three common variants:
- Salary + Net Profit Before Tax - the simplest. Total income = director's gross salary + the company's net profit before corporation tax. Common at Aldermore.
- Salary + Dividends + Retained Profit - more conservative. Income = salary + declared dividends + a percentage of retained profit (often 50-100%). Common at Halifax.
- Salary + Net Profit After Tax - rarer. Income = salary + post-corporation-tax retained earnings. Used by some specialists.
The percentage applied to retained profit varies by lender (some take 100%, some 50%). Multi-director companies are usually pro-rated by shareholding.
Worked example
Sarah is 100% shareholder and sole director of an IT consulting limited company. Her tax-optimised income structure:
- Salary: £9,100/year (NI secondary threshold).
- Dividends declared: £40,000 (£500 tax-free, £37,200 at 8.75% basic rate dividend, £2,300 wasted on band crossing).
- Company net profit: £180,000.
- Retained profit (after dividends): £130,900.
| Assessment basis | Income figure | Borrowing at 4.5x |
|---|---|---|
| Generalist (salary + dividends only) | £49,100 | £220,950 |
| Halifax-style (salary + dividends + 100% retained profit) | £180,000 | £810,000 |
| Aldermore-style (salary + net profit before tax) | £189,100 | £850,950 |
| Salary + retained profit (50%) | £74,550 | £335,475 |
Same Sarah, same business, same numbers. Different lender placement produces between £221k and £851k of borrowing capacity. £630,000 swing.
Coordinating with your accountant
Three things to discuss with your accountant before applying:
- Year-end timing: the most recent 2 finalised years are what matter. If you're about to file year-end and profit is unusually low, consider whether to delay the mortgage application by a few months.
- Dividend extraction strategy: pulling out large dividends in the year before applying can sometimes hurt (depletes retained earnings) and sometimes help (raises declared income for generalist lenders as backup). Balance against personal tax.
- Accountant reference content: the lender will request specific income figures. Coordinate so your accountant knows what's needed and signs off promptly.
What to do next
Director mortgage placement on retained-profit basis is one of the highest-leverage broker interventions in UK mortgage. Match with a self-employed specialist who places director cases monthly and knows exactly which lender takes which calculation for your specific company size. Bring your accountant into the loop early.
FAQs
What is retained-profit mortgage assessment?
An income basis used by some UK mortgage lenders for limited company directors where their assessed income includes operating/net profit retained in the business, in addition to salary and declared dividends. The rationale: profit retained in the business is part of the director's earning power even if it hasn't been extracted as dividend.
Which UK lenders accept retained-profit assessment?
Halifax, Kensington, Aldermore, Clydesdale, Family Building Society, and a small number of other specialists. Each has slightly different criteria - some take salary + retained profit; others take salary + dividends + retained profit; some require the director to own 20%+ shareholding; some require the company to be profitable for the most recent 2 finalised years.
How is retained profit calculated for mortgage purposes?
Usually 'operating profit' or 'net profit before tax' shown in the company accounts - the amount left over after revenue, costs, and director's salary are deducted, before dividends are declared. Some lenders use 'profit after corporation tax' instead. Always check the specific lender's definition with your accountant before applying.
Do I need an accountant reference for retained-profit assessment?
Essentially yes. Every retained-profit lender requires a written accountant reference confirming income figures across the most recent 2 years. The accountant must be a recognised professional (ACA, ACCA, CIMA, CIOT, FCCA, FCA, AAT in some cases). DIY accounts without a professional accountant typically won't qualify for retained-profit assessment.
Does retained-profit assessment work for new directors?
Mostly no. Lenders want to see 2 years of finalised company accounts with profit, signed off by an accountant. A director with 1 year of trading may get a partial route (some specialists accept 1-year with strong supporting evidence); fewer than 1 year typically doesn't qualify for retained-profit basis.