How you pay yourself as a limited company director can change the income a mortgage lender uses, sometimes by a large amount. Salary is counted by almost every lender, dividends are counted by some and ignored by others, and pension contributions paid by your company usually reduce the profit a lender sees unless it adds them back. No single pay structure is best for a mortgage; what matters is matching your pay to a lender that reads it fairly.
Key takeaway: How you are paid matters less than which lender assesses it. A lender that uses your share of company profit may see far more income than one that only counts salary and dividends, so the same figures can produce very different results.
[[stats: 3 = Ways lenders may read director pay | Up to 6.5x = Income with the right lender | 90+ = Lenders compared]]
How do lenders read each part of a director's pay?
Lenders broadly fall into two camps for limited company directors: those that use salary plus dividends, and those that use salary plus your share of the company's net profit. Each part of your pay looks different depending on which camp a lender is in.
[[table: | Salary and dividends lender | Salary and net profit lender ;; Salary | Counted | Counted ;; Dividends | Counted, usually averaged over two years or the latest year if lower | Not used. Your share of profit is used instead ;; Profit left in the business | Ignored | Counted, in line with your shareholding ;; Employer pension contributions | Not part of your income, so no direct effect | Reduce the profit figure, unless the lender adds them back ;; Personal pension contributions | May be treated as a commitment by some lenders | May be treated as a commitment by some lenders]]
This is a simplified picture. Lenders also differ on shareholding thresholds, how many years of accounts they need, and whether they work from profit before or after corporation tax. Our main guide to mortgages for limited company directors compares several lenders in detail.
Salary: simple, but often kept low
Salary is the easiest part of your income for any lender to recognise. It appears on payslips and P60s, and every lender counts it. For tax reasons, though, many directors keep their salary close to the personal allowance, which is £12,570 for 2026/27.
For a mortgage: a higher salary is visible to every lender, but on its own a low salary can make you look like a low earner to a lender that does not assess directors properly. If you are paid entirely through PAYE with no dividends, our guide to mortgages for directors on PAYE explains how some lenders can use your P60s.
Dividends: counted by many, but not all
Dividends are how most directors take the bulk of their income. For 2026/27, dividends above the £500 dividend allowance are taxed at 10.75% in the basic rate band, 35.75% in the higher rate band and 39.35% in the additional rate band, according to HMRC.
For a mortgage: salary and dividends lenders add your dividends to your salary. Many average two years, but use the latest year if it is lower, so a smaller dividend this year can pull your figure down. Several also will not count dividends above the company's net profit after tax. Our guide to low salary and high dividend mortgages covers how individual lenders treat them.
Profit left in the business: invisible to some, counted by others
Any profit you do not draw stays in the company. It is taxed at corporation tax rates, from 19% for small profits up to the 25% main rate for profits over £250,000, with marginal relief in between.
For a mortgage: a salary and dividends lender ignores it completely. A lender using salary plus net profit counts your share of it, which is why directors who leave a lot in the business often see the biggest difference between lenders.
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Pension contributions: tax-efficient, but they lower profit
Many directors have their company pay into their pension. Employer contributions are generally an allowable business expense, so they reduce corporation tax, and the standard annual allowance is £60,000 for 2026/27.
For a mortgage: because employer contributions are a company expense, they reduce the profit a profit-based lender sees. Some lenders may add them back, treating them as money you have chosen to put towards your retirement. Personal contributions you pay yourself can be treated differently again, as some lenders include them in their affordability calculations. Our guide to pension contributions and mortgage affordability goes into detail.
Same director, three different figures
Example: A sole director takes a £12,570 salary and £37,430 in dividends. The company also pays £20,000 into their pension, and makes £70,000 profit after corporation tax and after that pension contribution. A salary and dividends lender sees £50,000. A lender using salary plus net profit sees £82,570. If that lender also added back the £20,000 pension contribution, it could see around £102,570. At 4.5 times income, that is roughly £225,000, £371,565 or £461,565. This is an illustration only and not a quotation, and the right figures depend on your accounts and lender criteria.
Enter your own figures in the calculator below to compare the two main approaches.
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Help from a mortgage broker in Eastbourne
Quanstrom Financial is a whole-of-market mortgage broker based in Eastbourne, working with limited company directors in Lewes, Polegate, Tunbridge Wells and beyond, and across the UK by phone or video. A mortgage broker at Quanstrom Financial can show you how lenders would read your current pay structure, whether you are buying a home, an investment property or remortgaging. Find out more about how Quanstrom Financial works as a mortgage broker for limited company directors.
Book a free consultation through the contact page to find out what you could borrow.
Frequently asked questions
Is salary or dividends better for a mortgage?
Neither is better in every case. Salary is counted by all lenders, while dividends are counted by salary and dividends lenders but replaced by your share of profit at profit-based lenders. The right answer depends on your accounts and which lenders suit them, alongside your accountant's tax advice.
Which lenders use net profit instead of dividends?
Lenders including HSBC and Coventry Building Society may use your salary plus your share of the company's net profit after corporation tax, rather than the dividends you draw. Each sets its own rules on shareholding and years of accounts, and criteria change over time.
Does profit left in the company count towards a mortgage?
It may, with lenders that use salary plus your share of net profit. Lenders that only use salary and dividends, such as NatWest, do not count it.
Do pension contributions reduce how much I can borrow?
They can. Employer contributions reduce company profit, which matters to profit-based lenders unless they add the contributions back. Personal contributions may be included in some lenders' affordability calculations as a commitment.
Do company pension contributions count as income for a mortgage?
Not directly. They are a company expense rather than personal income. Some lenders may add them back to the profit figure, which can increase the income used, subject to criteria.
Is it easier to get a mortgage as a sole trader or a limited company director?
Neither is automatically easier. Sole traders are usually assessed on net profit from their tax calculations, while directors may be assessed on salary and dividends or salary and company profit. Our self-employed mortgage guide covers sole traders in more detail.
Written by Toby Quanstrom CeMAP, Director at Quanstrom Financial, a whole-of-market mortgage broker based in Eastbourne, East Sussex, specialising in mortgages for limited company directors and self-employed business owners.
This article is general information only and does not constitute personal or tax advice. Tax rates and allowances are for the 2026/27 tax year and may change. What you may be able to borrow depends on your individual circumstances and lender criteria. Calculator figures are illustrations only and are not a mortgage offer.
Your home may be repossessed if you do not keep up repayments on your mortgage.
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