For years, business owners have been told that low dividends equal low income, and low income equals low borrowing power. In 2025, nothing could be further from the truth. Yet this outdated belief persists among directors, accountants, and even some mortgage brokers who still assume that lenders only assess what appears on a personal tax return. For limited company owners, particularly those who pay themselves a small salary and minimal dividends, this misinformation creates unnecessary fear about mortgage affordability.

The reality is that modern lenders—especially specialist institutions and private banks—no longer rely on the simplistic “salary + dividends” formula. They understand how business owners structure their income for tax efficiency and how company profitability reflects true earning potential. This shift has been highlighted throughout Willow’s recent publications, including Directors’ Remuneration & Retained Profits: Smarter Borrowing for Ltd Company Owners in 2025 and Profit-Based Mortgages in 2025. But nowhere does it matter more than in the discussion around dividend minimisation.

In this guide, we dismantle the myth that low dividend drawings restrict borrowing power, explain how lenders actually evaluate business-owner income in 2025, and show why profit-based and company-strength underwriting is now the standard for directors seeking property finance.

Why the Dividend Narrative Is Wrong in 2025

The belief that dividends reflect a director’s true income remains rooted in historic underwriting models. Years ago, lenders looked strictly at what was withdrawn from the business. They assessed affordability through the narrow lens of SA302s and tax calculations, interpreting low dividends as low income.

However, modern lenders understand that directors often take a tax-efficient approach, drawing only what they need personally while reinvesting the remainder into the business. What matters in 2025 is not how much a director chooses to extract, but how much they could draw if required. Profit, retained earnings, operational strength and cash reserves reveal far more about a director’s financial status than personal drawings ever could.

Dividend minimisation is therefore not a barrier—it is a tax strategy. Lenders know this. And the more sophisticated the lender, the less important dividends become in assessing income.

The Role of Profit in Income Assessment

In 2025, lenders increasingly examine the company’s profit rather than the director’s drawings. If the business generates substantial profit, lenders interpret this as evidence of income capacity, regardless of the amount distributed as dividends. This shift is especially advantageous for directors who keep drawings low for operational or tax reasons.

Profit reveals the business’s ability to support the director financially. It shows recurring earnings potential and offers lenders a measure of how much income could be taken without compromising company stability. A company producing £200,000, £500,000, or £1m+ in annual profit tells a lender far more than a tax return showing £40,000 in dividends.

Private banks and specialist lenders often go a step further, assessing profit trends across multiple years, adjusting for one-off costs and interpreting the figures in the wider context of the business model. This approach allows them to treat consistent profit as the director’s true income base, even if they have taken minimal dividends historically.

Retained Earnings: The Hidden Powerhouse Behind Borrowing Power

Retained earnings have become one of the most important indicators for lenders evaluating business-owner income in 2025. Retained profit demonstrates several things simultaneously: that the business is profitable, that financial decisions are conservative, and that the company has the capacity to support higher remuneration if needed.

Directors often leave significant profit inside their company to build reserves, fund investment, or maintain stability. Lenders see these retained earnings not as leftover numbers, but as evidence of strength and flexibility. A director who takes £15,000 in dividends but whose company holds £300,000 in retained earnings is viewed radically differently from someone whose drawings match their tax returns.

In many cases, retained earnings are the deciding factor between a limited borrowing outcome and a high-value loan. They form part of the narrative explored in your earlier blog Retained Earnings as Income in 2025 and continue to shape underwriting approaches for business owners across the UK.

Company Liquidity and Cash Strength

Liquidity plays a central role in private bank lending and is increasingly relevant among specialist lenders as well. Cash reserves and operational balances demonstrate the business’s financial resilience. A company maintaining strong liquidity signals to a lender that the director could comfortably draw more income without jeopardising operations.

For directors with fluctuating revenue cycles or seasonal operating models, liquidity provides additional confidence. It indicates that even if revenue dips temporarily, the business can still support mortgage obligations. This understanding is absent from many high-street affordability models but is central to advanced underwriting in 2025.

Liquidity also supports enhanced income assessments because it reduces perceived risk. Lenders who see available cash are more willing to base income on profit rather than drawings, knowing that additional remuneration would not harm the business.

EBITDA: The Most Overlooked Metric in Director Lending

EBITDA has become a critical measure for private banks assessing director income. Unlike salary or dividends, EBITDA captures the operational profitability of a business before tax decisions, financing choices and non-cash expenses. For directors with depreciation-heavy operations or investment-rich companies, EBITDA often paints a far more accurate picture of income-generating capacity.

Private banks frequently use EBITDA as a core underwriting measure. They adjust for discretionary spending, normalise profit where appropriate, and assess whether the figure is stable or growing. This approach unlocks borrowing potential for business owners who might appear low-income under traditional assessments but whose businesses generate strong operational earnings.

EBITDA-driven underwriting demonstrates why dividend levels tell only part of the story—and why private banks lead the market for business-owner lending.

Why High-Street Lenders Struggle With Low Dividends

Many mainstream lenders still rely on outdated affordability models designed for employees rather than entrepreneurs. Their systems often treat dividends and PAYE income as the only acceptable inputs. This approach ignores the business behind the director, the retained earnings available, and the company’s profitability.

As a result, business owners who apply directly to high-street lenders often receive outcomes that bear no resemblance to their true borrowing capacity. A director taking minimal dividends may be offered a fraction of what specialist lenders or private banks would approve—not because the director earns less, but because the lender sees less.

This is why business owners frequently come to Willow Private Finance after being turned down by mainstream lenders, only to secure competitive offers elsewhere once their income is assessed properly.

Why Dividend Minimisation Is Often Misinterpreted by Accountants

Many accountants remain focused on tax efficiency alone. While this is their remit, it can lead to miscommunication when their reports are interpreted by lenders unfamiliar with business-owner structures. Some accountants recommend keeping dividends as low as possible, assuming that this will not affect mortgage outcomes. Others warn clients that low drawings will restrict their borrowing power.

Both of these positions overlook the reality of 2025 lending criteria. Lenders are not judging income based solely on what is extracted. They are evaluating the company’s overall ability to support remuneration. Accountants who provide supplementary explanations, adjusted profit calculations or forward-looking income statements help bridge this gap—but the key is choosing lenders who understand the underlying reality.

Hypothetical Scenario

Consider a director earning £12,570 in salary and £20,000 in dividends. On the surface, the applicant appears to earn £32,570. A high-street lender would assess the case accordingly. Meanwhile, the director’s company generates £300,000 net profit annually and holds six figures in retained earnings. A private bank assessing the same client sees a completely different picture: a profitable, stable business that could easily support far higher drawings if required. This structural difference—not tied to any specific real client—is representative of the reality business owners face.

The 2025 Outlook for Dividend-Based Underwriting

Lenders will continue moving away from dividend-driven underwriting as entrepreneurial structures become even more common across the UK. Private banks are leading this shift, specialist lenders are expanding their criteria, and even some high-street institutions are beginning to recognise profit and retained earnings as credible indicators of income.

For directors, the takeaway is clear: low dividends are not a limitation. They are a tax decision—nothing more. Income for mortgage purposes must now be understood through the lens of company performance, not drawings.

How Willow Private Finance Can Help

Willow Private Finance specialises in helping business owners unlock their true borrowing power by positioning company accounts, retained earnings, profit and liquidity correctly. The firm works with private banks and specialist lenders who understand modern director income structures and use advanced underwriting instead of relying on outdated tax-return figures. Whether you operate a single company, multiple entities or a group structure, Willow ensures your financial position is assessed on its full merit—not on misunderstood dividend levels.

Frequently Asked Questions

Q1: Do low dividends limit my borrowing power in 2025?
No. Lenders increasingly assess profit and company strength rather than tax-efficient dividend drawings.

Q2: Do private banks treat dividends differently from high-street lenders?
Yes. Private banks largely ignore dividend levels and focus on underlying business profitability and liquidity.

Q3: Can retained earnings replace dividends in affordability assessments?
Yes. Retained earnings are often treated as evidence of income capacity.

Q4: What if my accountant advises keeping dividends very low?
That is a tax decision, not a mortgage limitation. The right lenders will assess profit and earnings instead.

Q5: Do I need multiple years of dividends for a private bank mortgage?
No. Private banks assess company performance, not historical drawings.



Q6: Will I qualify for more borrowing if my company has grown quickly?
Often yes. Many lenders accept the latest year of accounts if profit and retained earnings have increased significantly.

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