Can I get a mortgage with one year of accounts?

Why most lenders want two years

Lenders underwrite self employed income by looking backwards. Two years of accounts or HMRC tax calculations let them average the figures, spot a declining trend and satisfy themselves the business is established. With one year there is no trend to read, so many lenders simply decline, not because the income is weak but because their policy has nothing to assess it against. That is a criteria problem, not a quality problem, and it is solved by going to the lenders whose policy says one year is enough.

Who lends on one year

A workable minority of lenders accept one completed year of trading. They fall into two groups. Some high street lenders will consider one year where the applicant has a strong background in the same line of work, for example a contractor who went limited after years in the same trade on PAYE. Specialist lenders go further and price for the risk instead, accepting a first year with an accountant's projection for the second. Rates at the specialist end are typically a little higher, for illustration perhaps 0.5% to 1% above mainstream pricing, and maximum loan to value may be trimmed.

The evidence that gets a one year case through

• Finalised accounts for the completed year, prepared by a qualified accountant, or the SA302 tax calculation with the matching tax year overview.
• Business bank statements, usually three to six months, showing trading income arriving.
• An accountant's certificate or projection for the current year, which several one year lenders treat as the second data point.
• Evidence of the pre trading background, such as a CV or prior payslips in the same trade. This is often what turns a marginal case.

A worked example

A sole trader electrician finishes her first year with a net profit of £52,000 after fifteen years on the cards for a contractor. A two year lender cannot use her at all. A one year lender applying a 4.5 times income multiple can support £52,000 x 4.5, which is £234,000. A more cautious lender capping first year trading at 4 times income would support £52,000 x 4, which is £208,000. The £26,000 gap between those two answers is decided by lender policy, not by anything about her, which is why lender selection matters more here than in almost any other case type.

For limited company directors the same logic applies but the income definition matters as much as the multiple, because lenders differ on salary, dividends and retained profit. We cover that in detail in our guide to how lenders assess limited company director income.

If the purchase is a buy to let

Buy to let is often more forgiving on trading history, because the loan is primarily assessed on rental cover rather than personal income. Many buy to let lenders want a minimum personal income, commonly £25,000, or simply evidence of some earned income, rather than two years of accounts. The rent test does the heavy lifting, and you can see what a given rent supports with our buy to let affordability calculator.

What slows one year cases down

The common delays are accounts that are not yet finalised, a tax year overview that does not match the SA302, income spikes the accountant has not explained, and applications sent to lenders whose policy was never going to accept one year. The last one wastes the most time, because a decline sits on the file and the case starts again elsewhere. Matching the case to the right lender first is most of the job, which is also the honest answer to what a commercial finance broker actually does.

Timing is worth checking too. If the first trading year ends within a few months, some applicants are better served waiting for the year end and applying with finalised figures, since a completed year at £52,000 beats ten months of estimates at the same run rate. Lenders typically want the accounts within 18 months of the application date, so fresh figures also widen the choice of lender.