Often, yes. Most lenders treat the date you incorporated as the start of a new business, but some lenders will not work off your incorporation date and will factor in your previous self-employment in the same line of work. They generally want two things to have stayed the same: who owns the business, and what the business does. Where both are unchanged, those lenders will usually work off your last two years of figures across the switch, and on some occasions just your latest year.
Key takeaway: Most lenders start the clock again when you incorporate, but some will look past your incorporation date to your self-employment before it. Same trade and same owners, and with those lenders your trading history can carry across. Bring in a new shareholder, such as a spouse, or change what the business does, and many lenders will treat the company as a new business instead.
[[stats: 2 years = Of figures lenders usually work from, across the switch | 1 year = Latest year's figures some lenders may use instead | 90+ = Lenders compared by Quanstrom Financial]]
Does going limited reset your trading history for a mortgage?
With most lenders, yes. A limited company is a new legal entity with its own incorporation date, and most lenders treat that date as the day your business began, which can leave you looking like a business with little or no track record.
Good to know: Not every lender works this way. Some lenders will not work off your incorporation date and will factor in your previous self-employment in the same line of work. If you have moved the same business, with the same owners, into a company structure, they can treat the company as a continuation of the trade you were already running.
A common example is an accountant who has worked as a sole trader for several years, incorporates for tax efficiency, and carries on serving the same clients in the same way. Nothing about the work has changed, only the way it is structured. That is the kind of switch these lenders are generally most comfortable with, and it is why choosing the right lender matters so much in the first year or two after incorporating.
What do lenders look at after you incorporate?
For the lenders that will look past your incorporation date, two questions decide most cases.
Has the ownership changed? If you were the sole trader and you are now the only shareholder, the ownership is the same. If the company has different or additional owners compared with the old business, lenders see a different business, even if the day-to-day work looks identical.
Is it the same business? The company should be carrying on the trade you ran as a sole trader. If you used the move to start something new, or to change what you do, there is no trading history in that line of work to carry across.
[[table: What changed when you incorporated | How lenders tend to view it ;; Same trade, same owners as before | Most lenders still start from your incorporation date, but some may treat it as a continuation and count your sole trader figures ;; Same trade, but a spouse or partner added as a shareholder | A change of ownership, so many lenders steer away from using your earlier history ;; Same trade, but new directors or shareholders brought in | Usually treated as a new business with different owners ;; A different trade or a new line of work | Treated as a new business, as there is no history in that trade to carry over]]
Does adding your spouse as a shareholder affect your mortgage?
It can, and it is the situation that catches people out most often. Adding a husband, wife or partner as a shareholder when you incorporate is common. To a lender, though, it means the business that existed before and the company that exists now have different owners.
Many lenders will then steer away from using your sole trader history, which can leave you looking like a company with little or no track record. That does not mean a mortgage is out of reach, but it usually narrows the choice of lenders and may mean waiting for company accounts. How your company is set up is a matter for you and your accountant. If you are planning to buy or remortgage in the next year or two, it is worth speaking to a mortgage broker at Quanstrom Financial before the change is made, so you know how lenders may view it.
Good to know: Your shareholding matters in its own right too. Most lenders treat a director as self-employed once they hold around 20% to 25% or more of the company, and some set a minimum shareholding before they will use your share of the company's profit. Our guide to mortgages for limited company directors covers this in more detail.
How many years' accounts do you need after going limited?
Where a lender accepts that the company is a continuation of your business, it will usually look at your last two years of figures, even if they span the switch. In practice that might mean your final year as a sole trader alongside your first year trading as a company. Some lenders average the two years, and on some occasions a lender will work from your latest year alone.
If your sole trader history cannot be used, some lenders may still consider you with a single year of company accounts. Our page on getting a mortgage with one year's accounts explains how that works.
Case study: Ryan, Eastbourne. Ryan changed from sole trader to limited company director three months before he came to Quanstrom Financial, and was worried he would need to wait two or three years for company accounts. Because the business and its shareholding had not changed, NatWest agreed to average his latest two years of tax calculations, using his sole trader income for affordability. Names changed. Every case is different, and lending depends on your circumstances and lender criteria.
{{primary_cta}}
Which situation are you in?
How lenders view your switch depends on what else changed when you incorporated. Tap whichever applies to you.
[[accordion: I incorporated recently and nothing else changed|If you own the company in the same way you owned the business before, and it carries on the same trade, some lenders may treat it as a continuation, even though most will start from your incorporation date. With those lenders your sole trader figures may still count, even if the company has only been trading for a few months. ;; I added my spouse or partner as a shareholder|Lenders see this as a change of ownership, so many will not use your sole trader history. Your choice of lender may be narrower, and some may want to see company accounts first. A mortgage broker at Quanstrom Financial can check which lenders may still consider your case. ;; I brought in a business partner when I incorporated|New directors or shareholders mean the company is owned differently from the business you ran before. Most lenders will treat it as a new business, so expect them to focus on the company's own accounts rather than your earlier figures. ;; I changed what my business does|If the company does something different from your sole trader business, there is no history in that trade to carry across. Lenders will usually treat it as a new business and assess it on its own accounts. ;; I am planning to incorporate soon|The structure you choose is a decision for you and your accountant. If a purchase or remortgage is coming up, speak to a mortgage broker at Quanstrom Financial before you make the change, so you understand how lenders may view your figures afterwards.]]
If more than one of these applies, or you are not sure how your own change would be viewed, a mortgage broker at Quanstrom Financial can look at your figures and your Companies House record together and tell you which lenders may be open to you.
What will a lender ask for?
Lenders want evidence that joins the two halves of your trading history together. Requirements vary, but you can usually expect to provide:
- Your SA302 tax calculations and tax year overviews from your sole trader years
- Your company accounts, once your first set has been prepared
- Details of the company's directors and shareholders, which lenders can check against Companies House
- Recent personal and business bank statements
Accounts prepared by a qualified accountant generally widen your choice of lenders. If you are not sure how to download your tax documents, our guide to getting your tax calculation and tax year overview walks you through it.
How is your income assessed once you are a director?
Once the company's figures are being used, you are assessed as a limited company director rather than a sole trader. Depending on the lender, that means either the salary and dividends you draw, or your salary plus your share of the company's net profit. The two can give very different answers, which is why the choice of lender matters so much for directors.
Our guides to salary, dividends and pension for a mortgage and mortgages on a low salary and high dividends explain how each approach works. The calculator below gives a feel for the difference between the two methods.
[[calc:directorprofit]]
Can you remortgage after going limited?
If you are staying with your current lender and moving to a new deal, known as a product transfer, there is usually no fresh income check as long as you are not borrowing more, so your change of structure is unlikely to come into it. Moving to a new lender is a full application, and everything in this guide applies in the same way as for a purchase.
Help from a mortgage broker in Eastbourne
Quanstrom Financial is a whole-of-market mortgage broker based in Eastbourne, working with self-employed people and company directors across East Sussex, including Brighton, Lewes and Hastings, and across the UK by phone or video. If you have recently incorporated, or are thinking about it, a mortgage broker at Quanstrom Financial can look at how your figures join up and which lenders may use them. Find out more about how Quanstrom Financial works as a mortgage broker for limited company directors, or read our wider guide to getting a mortgage when you are self-employed.
Book a free consultation through the contact page and find out what you could borrow.
Frequently asked questions
Does my trading history start again when I go from sole trader to limited company?
With most lenders, yes. However, some lenders will not work off your incorporation date and will factor in your previous self-employment in the same line of work, provided you are carrying on the same trade and the ownership has not changed. Where either has changed, lenders are likely to treat the company as a new business.
Can I get a mortgage straight after incorporating?
You may be able to. Most lenders will want company accounts first, but if the business and its owners are unchanged, some lenders may use your sole trader figures, so the company itself does not need a long track record of its own. Lender criteria vary, so it is worth checking which lenders suit your timing before you apply.
How many years' accounts do I need after going limited?
Where your sole trader history counts, lenders will usually look at your last two years of figures across the switch, and on some occasions just your latest year. Where it does not count, some lenders may consider you with one year of company accounts, subject to their criteria.
Does adding my spouse as a shareholder affect my mortgage application?
It can. Adding a spouse or partner as a shareholder is a change of ownership, so many lenders will steer away from using your sole trader history. That can narrow your choice of lenders, so if a purchase or remortgage is coming up, it is worth speaking to an adviser before the change is made.
Will lenders use my sole trader tax returns after I incorporate?
Some will, where the company is a continuation of the same business with the same owners. They will usually want the SA302 tax calculations and tax year overviews from your sole trader years alongside your company figures, so they can see one continuous trading history.
What counts as the same business for a mortgage?
Lenders generally want to see that the company carries on the trade you ran as a sole trader, for example an accountant who incorporates and carries on serving the same clients in the same way. If the business now does something different, lenders will usually treat it as new.
Should I get a mortgage before or after I incorporate?
It depends on your circumstances and timing. How you structure your business is a matter for you and your accountant, but if a purchase or remortgage is coming up, speaking to a mortgage broker at Quanstrom Financial first shows you how lenders may view your figures either way.
Can I remortgage after switching from sole trader to limited company?
In many cases, yes. A product transfer with your existing lender usually involves no fresh income check if you are not borrowing more, so the change of structure is unlikely to come into it. Moving to a new lender is a full application, assessed in the same way as a purchase.
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 advice. It is not tax advice, and you should speak to your accountant about how your business is structured. 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.
.svg)