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Yes, you can. Not every lender will look at one year of accounts, but a fair number will, including some high street lenders, provided the first year’s figures support the borrowing and the rest of the case is in order. In my experience the decision turns less on the number of years and more on what that one year shows, and on what you were doing before it.
This post covers what lenders ask for when you only have one year of figures, why your previous employment can matter as much as the accounts themselves, and the things I would check before an application goes anywhere near a lender. If you want the wider picture on self employed lending, my self employed mortgages page covers the two and three year cases too.
Some high street lenders and most specialist lenders will consider one year of accounts. Others still want two or three.
You will need your first year's finalised accounts or SA302 and tax year overview, and often a letter from your accountant.
What you did before going self employed matters. The same trade as an employee reads as continuity of income.
What do lenders ask for with one year of accounts?
The core paperwork is the same as any self employed application, there is just less of it. If you are a sole trader or in a partnership, that means your SA302 tax calculation and the matching tax year overview from HMRC for the year you have completed. If you trade through a limited company, it means the first year’s finalised accounts, signed off by a qualified accountant, and usually your SA302 as well. I have written a separate post on what an SA302 looks like and how to download one.
On top of that, most lenders working from one year of figures want three to six months of personal and business bank statements, proof that you are registered as self employed, and often a letter from your accountant. That letter usually confirms when you started trading, what the first year’s figures were, and a projection for the current year. In my experience the accountant’s letter is the document that most often turns a maybe into a yes, because it shows the lender the business is still trading at or above the level in the accounts.
One practical point: the tax year and your accounting year are not always the same thing. Lenders want the figures to be recent, so if your first year ended a while ago, the current year’s picture matters too.
Does it help if I was employed in the same trade before?
Yes, and in my experience this is the point that decides more one year cases than anything else. Lenders are not really counting years for the sake of it. They are asking whether your income is likely to carry on. Someone who spent ten years as an employed electrician and then set up on their own as an electrician has a track record in that trade, even if the self employed part of it is only twelve months old. Someone who left an office job to start a business in a field they had never worked in is a different proposition, because there is no evidence yet that the demand for what they sell will hold.
I placed a one year accounts case with a high street lender rather than a specialist, and what made it work was exactly this. The client had been employed in the same trade before going self employed, so the lender could see continuity of income across the change. The accounts were only one year old; the trade was not.
That is one case, not a rule. Every lender sets its own criteria, and every application is assessed on its own facts. It does show that the answer is not always a specialist lender, and that the story before the accounts can carry real weight. If your situation looks similar, I am happy to have a chat about it.
I have also written up a first time buyer case with one year of self employed income from an online platform, which shows a different route through the same problem.
What I would check first
Before I approach any lender on a one year case I want to know four things. First, whether the accounts are actually finalised and the tax return filed, because a lender cannot work from a draft. Second, what the first year’s figure looks like once you have taken the reasonable expenses off it, because that net figure, not turnover, is what the lender will use. Third, what you were doing for the two or three years before you started, and whether it was the same line of work. Fourth, how the current year is going, because a projection that shows the business growing supports the case and one that shows it shrinking does not.
I also look at the rest of the application with a slightly harder eye than usual. A one year accounts case with a clean credit file and a sensible deposit is a straightforward conversation with the right lender. The same case with a thin file or a missed payment narrows the choice quickly, because the lenders who accept one year of trading tend to want everything else to be tidy.
Speak to an expert
Self employed for a year and wondering whether you can borrow yet? Send me your first year’s figures and a line about what you were doing before, and I will tell you honestly which lenders are worth approaching and which are not.
How much can I borrow with one year of accounts?
The lender takes your net profit for the year (or salary plus dividends, or salary plus share of net profit, if you run a company) and applies its usual affordability model to it. With two or three years of figures a lender will normally average them, or use the latest year if it is lower. With one year there is nothing to average, so the single figure carries the whole case, and some lenders will weigh it against your accountant’s projection for the current year.
Some lenders also cap the loan to value on one year cases below what they would offer with two years of figures, so a larger deposit tends to widen the choice. That is not universal, and it is one of the things I check lender by lender rather than assume.
Can I get a mortgage after one year of freelancing?
Freelancing is self employment in a lender’s eyes, so the same rules apply. If you invoice through your own limited company you will be assessed as a director. If you work on day rate contracts, some lenders will use the contract rate rather than the accounts, which is a different route again and one I cover in my post on day rate versus PAYE for contractors.
Whichever route fits, the thing I would ask first is the same: what were you doing before, and does the one year of figures look like the start of something that will continue? Tax questions that come out of this, such as how to structure your drawings, are for your accountant rather than me.
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