Being self-employed with bad credit can make a remortgage harder, because lenders are assessing two things at once: whether your income is reliable and how you have managed credit. It is often still possible, but it depends on how long you have traded, how your income is evidenced and how serious and recent the credit issues are. Some lenders are comfortable with one of these but not the other, so the choice of lender matters.
This page explains the documents lenders commonly ask for, how sole traders, directors and contractors are assessed, and how income that varies from year to year combines with a credit history that has problems on it.
On this page
In short
- Lenders commonly ask for 2 years’ accounts or SA302s with tax year overviews. Some consider 1 year.
- Directors may be assessed on salary plus dividends, and some lenders consider retained profits.
- Contractors may be assessed on their day rate.
- Explaining when and why credit problems happened, with evidence, helps an adviser present your case.
Why is it harder to remortgage when you are self-employed with bad credit?
Each issue on its own narrows the choice of lenders. Some lenders that are happy with self-employed applicants want a clean credit file, and some that consider adverse credit prefer employed applicants with payslips. When both apply, the number of suitable lenders can be smaller.
The two are often connected. A slow trading year can lead to missed payments or a default that stays on your file long after trade has recovered. Lenders will want to understand the link and see that your income is now stable.
What proof of income do self-employed applicants need?
Lenders commonly ask for 2 years of figures, and some will consider 1 year. The usual evidence includes:
- SA302 tax calculations with the matching tax year overviews, both available from your HMRC online account. See GOV.UK’s guide to getting your SA302.
- Finalised accounts, often prepared by a qualified accountant.
- Business and personal bank statements, showing income arriving and how the accounts are run.
- An accountant’s reference or certificate, which some lenders ask for to confirm your figures.
Late tax returns, or an arrangement to pay HMRC, can raise questions. Have the details ready rather than waiting to be asked.
How do lenders assess sole traders, directors and contractors?
| Type | Income lenders commonly use | Evidence often requested |
|---|---|---|
| Sole trader | Net profit, often averaged over 2 years or based on the latest year. | SA302s and tax year overviews, or accounts. |
| Partner | Your share of the partnership’s net profit. | SA302s, tax year overviews and partnership accounts. |
| Limited company director | Salary plus dividends. Some lenders consider your share of net profit, including retained profits. | Company accounts, SA302s and tax year overviews. |
| Contractor | Some lenders convert the day rate into an annual figure. | Current contract, contract history and sometimes a CV. |
General information only. Lenders set their own criteria and approaches vary. Retained profit and day-rate assessments are offered by some lenders, not all.
If your income has fallen, some lenders use the lower or most recent year rather than an average. Rising income usually helps, although lenders may still look closely at both years.
How credit issues and variable income combine
A lender looking at variable income and adverse credit together is asking whether the mortgage will stay affordable in a weaker year. A recent county court judgment alongside falling profits is likely to be viewed more cautiously than an older, settled default with steady or rising income.
Business debts and your personal credit file
As a sole trader or partner, business debts are personal, so problems with suppliers, business loans or cards can appear on your own credit file. A limited company’s debts usually sit with the company, but a personal guarantee can make you personally liable, and a lender may ask about company CCJs or insolvency.
It helps to be able to explain the dates: when trade dipped, what went wrong and what has changed. Bank statements and accounts that show recovery can support that explanation.
Ways to strengthen a self-employed remortgage application
- File tax returns on time and keep SA302s and tax year overviews to hand.
- Keep business and personal finances in separate accounts.
- Check your reports from all three agencies and correct any errors. See what lenders check on your credit file.
- Avoid new credit applications in the months before you apply.
- Ask your accountant whether they can provide a reference if a lender needs one.
- Consider whether more equity, or borrowing less, could widen your options.
Equity can make a real difference when income and credit are both being looked at closely. Our guide on how LTV affects a bad credit remortgage explains why.
Raising money to clear business or personal debts
Some self-employed people want to borrow extra on a remortgage to clear debts built up during a difficult period. This turns unsecured debt into debt secured on your home, and a longer term can mean paying more in total. Read our page on debt consolidation remortgages before deciding, and consider free advice from MoneyHelper or National Debtline.
If you are not borrowing more, a product transfer with your current lender can provide a new deal without a full affordability assessment, which some self-employed borrowers find simpler.
What may affect your remortgage options
Lenders look at your trading record and your credit file side by side. These are the points that most often shape what may be possible.
| Factor | Why it matters |
|---|---|
| Age of the credit issue | Problems from a past trading dip that were settled some time ago usually weigh less than recent ones, especially if income has since recovered. |
| Amount | A small default on a supplier account may be viewed differently from a large unpaid loan or tax debt. |
| Whether satisfied or settled | Satisfied CCJs and settled defaults show debts have been dealt with, although they remain on file for 6 years. |
| Number of issues | Several issues from one bad period may be easier to explain than a pattern spread over several years. |
| Current mortgage payment history | Keeping the mortgage paid through a quiet trading spell can count in your favour. |
| Property value | A current valuation shows how much equity you have, which can help offset concerns about income or credit. |
| Outstanding mortgage balance | What you owe, and any extra you want to raise, sets the loan size a lender needs to be comfortable with. |
| Loan-to-value and equity | A lower LTV can widen the choice of lenders when both income and credit are being scrutinised. |
| Income and affordability | Each lender decides which figure to use: an average, the latest year or the lower of two. Affordability and stress testing are based on that figure. |
| Employment type and trading history | How long you have traded, and whether you are a sole trader, director or contractor, decides which evidence and income figures apply. |
These are general points, not lender rules. Each lender sets and changes its own criteria.
Information an adviser may ask for
You don’t need all of this to make an enquiry. It helps to know where to find it, because an adviser is likely to ask about most of it.
- SA302 tax calculations and tax year overviews, usually for the last 2 years
- Finalised business accounts, and company accounts if you are a director
- Details of salary, dividends and retained profits if you run a limited company
- Your current contract and day rate if you are a contractor
- Your accountant’s details and whether they hold a recognised qualification
- Recent business and personal bank statements
- Your credit reports from Experian, Equifax and TransUnion
- An explanation of when and why any credit issues happened
- Details of any HMRC time to pay arrangement
Specific situations
More detail for particular circumstances.
Self-employed remortgage after bankruptcy
Trading as a sole trader, director or contractor during and after bankruptcy, business asset rules, and how to build the evidence a remortgage needs.
Self-employed remortgage after an IVA
Trading through an IVA as a sole trader, director or contractor, how variable income is handled, and what changes once the IVA has completed.
Remortgaging as a limited company director with bad credit
How lenders assess a director’s salary, dividends and retained profit when there is also adverse credit, and what to prepare if you run more than one company.
Remortgaging as a contractor with bad credit
How lenders convert a contractor’s day rate into income, why the way you are engaged matters, and how contract gaps and adverse credit are viewed together.
Self-employed with falling income and bad credit
How lenders generally view falling self-employed income alongside a credit issue, and how to present a weaker year clearly to an adviser.
Remortgaging when you are self-employed and owe HMRC
How owing HMRC as a self-employed applicant is generally treated on a remortgage, including Time to Pay arrangements and the risk of using a remortgage to clear tax debt.
Remortgaging with only one year’s accounts and bad credit
What it means to remortgage with only 1 year of self-employed accounts alongside a credit issue, and how to strengthen a shorter track record.
Remortgaging as a sole trader with bad credit
How a sole trader’s net profit is worked out, why business debts appear on your personal credit file, and how this combines with a credit issue.
Self-employed remortgage with a CCJ
What commonly causes a CCJ when you are self-employed, how to show a lender your trading has recovered, and how business structure affects what the judgment means.
Self-employed remortgage with defaults
Why self-employed defaults often follow a single quiet trading period, how multiple small defaults are viewed, and how your accounts can support your case.
Self-employed remortgage with a debt management plan
How a debt management plan works around variable self-employed income, when payments might need adjusting, and what a lender wants once you remortgage.
Self-employed remortgage with missed payments
Why irregular self-employed income leads to occasional missed payments, and how to show a lender your outgoings now match when money actually arrives.
Self-employed remortgage with mortgage arrears
What a self-employed applicant can do while in mortgage arrears, how income evidence changes once trading recovers, and when remortgaging may become realistic.
Frequently asked questions
Can I remortgage with only 1 year of accounts and bad credit?
It may be possible, but it is one of the harder combinations. Some lenders consider 1 year of figures, and some consider adverse credit, but fewer do both. More equity, and credit issues that are older or settled, can help. An adviser can check which lenders may consider your figures before any application is made.
Do lenders use my salary and dividends or my company’s profits?
Many lenders assess limited company directors on salary plus dividends, as shown on SA302s. Some consider your share of the company’s net profit, including profit retained in the business, which can give a higher figure if you draw a low salary. Which approach applies depends on the lender, so have company accounts ready as well as your personal tax documents.
Will a CCJ against my limited company affect my remortgage?
A CCJ against a limited company is recorded against the company, not on your personal credit file. However, some lenders ask about the credit history of businesses you run, and a personal guarantee can turn a company debt into a personal one. If a judgment was made against you as a sole trader, it is personal. Our page on remortgaging with a CCJ explains how those are viewed.
I owe HMRC. Can I still remortgage?
It depends on the amount and whether it is covered by an agreed arrangement. A time to pay arrangement with HMRC may be treated as a committed outgoing, and lenders will want to see it being kept to. Unpaid tax without an arrangement is likely to concern lenders more. If you are struggling, GOV.UK explains what to do if you cannot pay your tax bill.
Does my accountant need specific qualifications?
Some lenders only accept accounts or references from accountants who belong to a recognised professional body, such as a chartered or certified accountancy body. Others are more flexible. If your accounts are prepared by a bookkeeper or by you, mention this early, as it may affect which lenders can consider your application.
Are contractors treated as self-employed for a remortgage?
It depends on the lender and how you work. Some lenders assess contractors on their day rate, converted into an annual figure, where there is a track record in the same line of work. Others treat limited company contractors as directors and use accounts, and umbrella company workers may be assessed on payslips. The approach can change the income figure considerably, so it is worth knowing which applies.