Many directors pay themselves a modest salary and take the rest as dividends, which can make income look lower on paper than the company actually earns, and that matters when a lender is already being cautious about your credit history.
This page goes further than our main self-employed bad credit remortgage page on director-specific detail: salary versus retained profit, running more than one company, and how a company’s credit problems differ from your own.
On this page
This page covers
- Employment
- Company directorSome lenders look at salary and dividends, others at your share of company profit.
Read the main guide: Remortgaging when you are self-employed and have bad credit
In short
- Most lenders assess directors on salary plus dividends, but some will also look at retained profit left in the company.
- A low salary taken for tax reasons can understate your income to a lender that only uses salary and dividends.
- A CCJ against your company is not the same as one against you personally, unless you gave a personal guarantee.
- Running more than one company, or a company with a short trading history, usually needs extra paperwork.
Why does it matter how you pay yourself?
Many directors take a small salary, often close to the personal allowance, and draw most of their income as dividends because it can be more tax efficient. A lender that only counts salary and dividends will use the figures on your SA302s and payslips, which reflect that decision rather than how well the business is actually doing.
If the company has had a strong year but you left profit in the business rather than drawing it out, salary-and-dividend lenders will not see that extra strength. This is separate from your credit history, but it narrows the field further when a lender is already cautious about a CCJ or default on your file.
How is retained profit used, and when does it help?
Some lenders will consider your share of the company’s net profit after tax, including profit retained in the business. This can give a higher figure for a director who reinvests rather than draws large dividends, but it needs full company accounts, not just personal tax documents.
| Approach | What it uses | When it may help |
|---|---|---|
| Salary and dividends | SA302s and tax year overviews | When dividends have been drawn fairly evenly and reflect the company’s trading |
| Salary plus share of net profit | Company accounts, showing profit before your dividend decisions | When you have kept a low salary and left profit in the company |
| Latest year only | The most recent set of accounts | When this year is stronger than the last, rather than averaging the two |
General information only. Which approach a lender uses, and whether it will combine it with adverse credit, varies by lender.
A stronger, better-evidenced income figure will not usually offset a very recent or serious credit issue on its own, but it can widen which lenders will consider your application at all.
What if you own more than one company, or a newer one?
Directors of more than one company usually need accounts and SA302s for each, and a lender will want to understand how the businesses relate to each other. A company trading for less than 2 years is assessed like any newer business: see our page on remortgaging with one year’s accounts.
Company credit problems versus your own
A CCJ or default against your limited company is recorded against the company, not against you personally, unless you signed a personal guarantee. Lenders may still ask about insolvency proceedings, a winding-up petition or a business CCJ involving a company you direct, even where your personal file is clean. Our page on a business CCJ explains the distinction.
Strengthening a director’s application
- Have 2 years of company accounts and SA302s ready, or explain clearly if you only have 1 year.
- Ask your accountant whether they hold a recognised qualification, as some lenders require this for references.
- Keep a note of why your salary and dividend pattern looks the way it does, especially if it changed recently.
- Gather details of any other companies you direct, including their trading dates.
- Check your personal credit reports from Experian, Equifax and TransUnion.
- Be ready to explain any company insolvency history, even if it is not on your own file.
A larger deposit or more equity can also help when a lender is weighing up both an unusual income pattern and a credit issue together. See our guide on how loan-to-value affects a bad credit remortgage.
What may affect a director’s remortgage options
| Factor | Why it matters |
|---|---|
| Salary and dividend pattern | Whether dividends have been drawn consistently, and how they compare with the company’s profits. |
| Retained profit | Some lenders will consider profit left in the company as part of your income; others will not. |
| Number of companies | Directors of more than one company usually need accounts and tax documents for each. |
| Trading history of the company | A company trading for under 2 years is generally treated like any newer self-employed applicant. |
| Company credit and insolvency history | Business CCJs, winding-up petitions or previous insolvency involving a company you direct may be asked about. |
| Personal guarantees | A personal guarantee on a business debt can make a company liability personal, and relevant to your own credit file. |
| Age and status of any personal credit issues | How recent, how large and whether satisfied, alongside your income evidence. |
| Loan to value | How much you want to borrow against the property’s current value. |
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.
- Company accounts and SA302s with tax year overviews, usually for the last 2 years
- Details of your salary and dividends for each of those years
- Accounts and structure details for any other companies you direct
- Your accountant’s details and professional body membership if they have one
- Your personal credit reports from Experian, Equifax and TransUnion
- Details of any personal guarantees given on business borrowing
- An explanation of any company insolvency history, even if not on your personal file
Frequently asked questions
Will a lender use my salary and dividends or the company’s profit?
It depends on the lender. Many use salary plus dividends as shown on your SA302s. Some will consider your share of the company’s net profit, including profit retained in the business, which can give a higher figure if you take a low salary. Have both company accounts and personal tax documents ready so an adviser can see which approach may suit you.
Does a CCJ against my company affect my personal remortgage?
A CCJ against a limited company sits on the company’s record, not your personal credit file, unless you gave a personal guarantee for the debt. Some lenders still ask directors about company insolvency or CCJ history as part of the application, even where it does not show on your own file.
Can I remortgage if my company has only traded for a year?
It may be possible. Some lenders consider 1 year of accounts, though fewer do so alongside adverse credit. See our page on one year’s accounts for what is generally involved.
Does taking a low salary for tax reasons count against me?
It can, with lenders that only use salary and dividends, because it may understate what the business actually earns. Lenders that will also consider retained profit can give a fuller picture, so it is worth knowing which type of lender an adviser is looking at for you.