Limited company directors often enjoy greater flexibility than salaried employees when it comes to how they draw income. However, that same flexibility can become a challenge when applying for a mortgage. Many directors choose to keep earnings within their companies for tax efficiency, drawing modest salaries and dividends while leaving substantial retained profits in the business.

In 2025, this practice creates both opportunity and complexity. Some lenders continue to judge directors solely on what they physically withdraw, while others are increasingly willing to take a broader view of the business’s financial strength. Understanding which lenders will credit retained profits, how they treat director remuneration, and what documentation is needed can make the difference between a restricted loan offer and unlocking your true borrowing capacity.

The Remuneration Challenge

A director with a successful business may technically “earn” six figures, but if they draw only £20,000 in salary and £30,000 in dividends, many mainstream lenders will treat their annual income as £50,000. For mortgage purposes, this can significantly understate affordability.

While this approach aligns with traditional underwriting, it fails to reflect the economic reality of many businesses. Retained profits are often used strategically—to fund growth, provide a cash buffer, or invest in expansion. They may represent genuine capacity to service a mortgage, but not every lender is willing to count them.

Lender Approaches in 2025

Today’s mortgage market offers a split approach. High street lenders typically remain conservative, focusing on drawn salary and dividends. They may request two to three years of accounts, averaging income across the period. This can disadvantage directors whose businesses have grown quickly or who deliberately draw minimal dividends.

Specialist lenders and private banks, however, have become more pragmatic. Increasingly, they will take into account net profit before tax, or even retained profits left in the company, when assessing affordability. This broader view can significantly boost borrowing power. For high-value cases, some private banks will look at the entire financial ecosystem of the client—company accounts, personal investments, and assets—to build a holistic picture.

This is particularly relevant for directors with international operations or multiple ventures, where assessing personal affordability requires more than payslips and dividend vouchers. We covered a similar flexibility in Private Client Finance in 2025: Tailored Lending for Complex Profiles.

Retained Profits Explained

Retained profits are earnings kept in the business after all expenses, tax, and dividends have been paid. For directors, they serve several purposes: ensuring liquidity, providing reserves for investment, or reducing personal tax liabilities.

From a mortgage perspective, they represent a form of untapped wealth. If a company consistently generates strong profits but the director draws modestly, it is logical to argue that the business could sustain higher personal income if required. Some lenders agree, effectively treating retained profits as proof of affordability. Others insist that unless the money has been withdrawn, it cannot be counted.

Real-World Case

Willow recently worked with a director whose technology business generated £400,000 profit annually. He drew only £50,000 as a mix of salary and dividends to keep personal tax bills manageable. His bank offered a mortgage of £225,000 based on that drawn income.

By working with a specialist lender who accepted retained profits as part of affordability, we secured a mortgage of £750,000—more than three times what the high street was prepared to lend. This allowed the client to purchase the family home they wanted while maintaining their efficient tax strategy.

Documentation Matters

For directors, preparation is crucial. Lenders will want to see:

• Full company accounts (preferably signed off by a chartered accountant).
• SA302s and tax year overviews.
• Dividend vouchers, if applicable.
• Evidence of consistent profitability, not just a one-off good year.

For high-value borrowing, lenders may also request management accounts or business bank statements to validate cash flow.

Strategic Considerations

Deciding whether to draw more dividends or rely on retained profits is not just about the mortgage application. It also has implications for taxation, business strategy, and long-term wealth planning. Directors should consider how mortgage structuring fits alongside corporate planning, pension contributions, and investment strategies.

For portfolio landlords using limited companies to structure buy-to-let investments, the interplay between company accounts and mortgage underwriting is even more significant. Understanding whether to hold profits, reinvest them, or extract them can directly impact both tax efficiency and lending capacity.

How Willow Can Help

At Willow Private Finance, we specialise in helping company directors structure their borrowing effectively. We know which lenders focus narrowly on salary and dividends, and which will take a more holistic view of business performance. We also work with private banks that can tailor solutions around retained profits, complex ownership structures, and international income.

For directors considering a property purchase or refinance in 2025, this knowledge is vital. The wrong approach could leave you significantly under-borrowed, while the right lender could unlock your full potential without compromising your corporate strategy.

📞 Want Help Navigating Today’s Market?

If you are a company director weighing up whether to increase your dividends or leverage retained profits for a mortgage, the decision could save—or cost—you hundreds of thousands of pounds in borrowing power.