Published 2026-07-19 · Contractor Mortgage Guide · Written and reviewed by Phillip Wakeling-Smith (CeMAP)

Retained profits and your mortgage: borrowing on money you left in the company

Quick answer: Most lenders assess a limited-company director on salary + dividends actually drawn — so if you deliberately leave profit in the company, your assessable income can look far smaller than your business's reality. A minority of lenders instead assess salary + your share of the company's net profit, which puts the retained money back into the calculation. The catch everyone misses: you can't have both. Salary + dividends or salary + net profit — combining dividends with the profit that funded them is double-counting, and no lender allows it.

The problem, with numbers

Say your company makes £120,000 net profit after your £12,570 salary, and you draw £37,500 in dividends, leaving the rest in the company for tax efficiency.

• Salary + dividends lender: assesses £50,070. At 4.5×, roughly £225,000 of borrowing.
• Salary + net profit lender: assesses £132,570 (salary + full profit share). At 4.5×, roughly £596,000.

Same business, same year, same person — the income definition changes the answer by well over a quarter of a million pounds. It's the limited-company version of the day-rate annualisation spread we track on the day-rate calculator.

Note the net-profit route typically uses profit after corporation tax at some lenders and before at others — another definitional gap worth checking rather than assuming.

Who this route is for — and who it isn't

It fits you if: you own all or most of the company, deliberately retain profit, and your drawings understate the business's performance. Classic day-rate contractor running a personal service company, and also established consultancies.

It won't help if: you already draw most of the profit (the two definitions converge), your retained profit is needed as working capital a lender would discount, or the company's profit is falling year-on-year — most lenders average two years or take the lower/latest figure.

Contractor-specific note: if you're a genuine day-rate contractor, a lender's contract-rate route (day rate × 5 × 46–48 weeks) often beats both accounts-based definitions — annualisation typically produces a bigger number than one year's accounts for the same person. Compare all three routes before picking a lender: how the day-rate assessment works, and your structure's options in the contract-type checker.

Evidence the retained-profits route needs

• Two years' (sometimes one, more lenders at two) finalised accounts — and the assessable figure moves with accounting decisions (pension contributions, equipment purchases, your salary level), so the year-end choices you make with your accountant echo into your mortgage capacity.
• Tax calculations and overviews (SA302s) consistent with the accounts.
• An accountant's reference — most net-profit lenders want the figures certified by a suitably qualified accountant.
• Shareholding evidence — the profit share follows your equity.

The traps

1. Double-counting — dividends + the net profit that funded them. Any application built that way unravels at underwriting.
2. Company money isn't deposit money. Using retained profit as your deposit means extracting it (dividend tax event) or a director's loan — both have tax consequences that need accountancy advice before you commit to a purchase.
3. Declining profits — the route showcases your accounts, so a weak latest year is amplified, not hidden.
4. Fewer lenders, and criteria vary quietly — pre/post-corporation-tax, one vs two years, minimum trading history. This is a criteria-matching exercise, not a rate-shopping one.

FAQ

Can I use retained profits for a mortgage?

At the right lenders, yes — they assess salary plus your share of company net profit rather than salary plus dividends. It's a minority of the market but includes meaningful names, and for deliberate profit-retainers it can roughly double the assessable income.

Can I combine dividends and retained profits?

No. Dividends are paid out of profits — counting both is double-counting and no lender permits it. The choice is salary+dividends or salary+net profit, whichever definition (at a lender that offers it) reads your business best.

Do I need to actually withdraw the money?

No — that's the point of the route. The lender assesses the profit as evidence of what you could draw sustainably; the money stays in the company. Your deposit, though, must be real, extracted (or separately held) funds.

Will my pension contributions hurt this route?

Company pension contributions reduce net profit, so yes — they shrink the assessable figure on a net-profit assessment (while being invisible to a salary+dividends assessment). If a purchase is coming, discuss timing with your accountant.