The idea that a company director “only earns £12,570” is one of the most harmful myths in the UK mortgage market. Every day, business owners are told by high-street lenders—and sometimes even by inexperienced brokers—that their borrowing power is restricted to their PAYE salary or the dividends they choose to draw. This outdated belief forces profitable business owners into weaker mortgage outcomes, lower affordability assessments, and unnecessarily limited borrowing.
In 2025, this narrative is entirely wrong. The lending landscape for directors has changed dramatically, with specialist lenders and private banks now assessing business performance, not drawings. They recognise that directors do not extract their true income for tax reasons, and that a tax return rarely reflects economic reality. This trend is echoed across the growing field of profit-based underwriting, covered in detail in Willow’s live article
Directors’ Remuneration & Retained Profits: Smarter Borrowing for Ltd Company Owners in 2025.
The same evolution applies to company structures, groups, SPVs and multi-entity arrangements, where lenders increasingly assess consolidated strength rather than individual tax figures. This aligns with the flexibility seen in specialist products explored in
Short-Term Property Finance: Your Options.
Understanding this shift is crucial for directors who want smarter, higher and more accurate borrowing outcomes. This guide explains why the £12,570 rule must be ignored—and how to position your financials to secure lending based on true business performance.
Why the £12,570 Rule Is Outdated in 2025
The £12,570 director salary became a common tax strategy because it aligns with personal allowances and minimises PAYE. For many years, lenders applied a simplistic approach: whatever the director paid themselves was deemed to be their income. But this interpretation makes no commercial sense.
A director may pay themselves £12,570 and take minimal dividends, yet operate a company generating hundreds of thousands in profit. The income extracted is a tax decision, not a reflection of affordability. In 2025, more lenders recognise that drawings are not a reliable indicator of income. As a result, the industry is shifting away from historic documentation and towards real business performance.
Directors who still believe their borrowing power is restricted to low PAYE income are operating with an outdated mindset—and in many cases, limiting their own financial opportunities.
How Lenders Now Assess Real Income for Directors
Lenders who understand business-owner income take a very different approach from high-street banks. Rather than relying exclusively on tax returns, they evaluate the company holistically, examining profit, retained earnings, liquidity, business model resilience and multi-year trends.
The process typically begins with a full review of company accounts, rather than an isolated look at personal tax submissions. This includes profit and loss performance, retained earnings, operating margins, and the director’s ability to draw income without destabilising the business. Directors’ loan accounts are also reviewed, particularly when the company owes the director money that can be withdrawn tax-free.
Instead of assessing what the director
did withdraw, lenders assess what the director
could withdraw safely. This distinction is crucial.
Specialist lenders and private banks model income based on actual business capacity, not historical drawings. This shift enables much higher borrowing levels for directors whose declared income is lower than their company’s true profitability.
Why Drawings Don’t Equal Income
For tax efficiency, most directors leave profit in the business. This may be for reinvestment, operational stability, liquidity, or strategic planning. Lenders who understand entrepreneurial structures recognise that drawings are a choice. They are not a measure of income.
A company generating £250,000 net profit does not become less profitable because a director chooses to extract only £30,000. The business performance remains intact, and lenders increasingly evaluate affordability on this basis.
Certified income provided by accountants can further support this assessment, particularly when adjusted profit calculations demonstrate higher sustainable income than declared figures would suggest. This is especially useful for directors with fluctuating drawings, reinvestment-heavy businesses or multi-company portfolios.
Why Relying on High-Street Lenders Creates Borrowing Roadblocks
High-street lenders generally rely on SA302s and declared income. They often require two full years of accounts and average them, even when the business is rapidly growing or undergoing structural change. This rigid methodology penalises directors who:
- reinvest profit
- take minimal dividends
- operate multiple companies
- use SPVs or structure portfolios corporately
- experience significant year-on-year growth
- hold substantial retained earnings
High-street lenders lack the flexibility to assess complex or non-traditional income. As a result, directors who choose them often receive dramatically lower offers than they could achieve elsewhere.
This is why borrowing gaps between lender types have become so pronounced. Choosing the wrong lender can cut a director’s borrowing power in half—even where the business is strong.
The Lenders Who Ignore the £12,570 Myth Entirely
A growing number of specialist lenders and private banks have abandoned the salary-and-dividend model. Their underwriting looks at:
- net profit
- retained earnings
- EBITDA
- liquidity
- business resilience
- forward trading forecasts
- consolidated group performance
- director loan account balances
Where high-street lenders see a £12,570 salary, specialist lenders see a profitable company capable of supporting significantly higher income. This more sophisticated assessment reflects true affordability and aligns with how directors actually earn.
Private banks in particular use relationship-based underwriting. They may consider cash reserves, long-term business projections, investment structures, global income streams and even non-property assets—far beyond what traditional lenders will accept.
This enables significantly higher borrowing levels, especially for directors with multiple revenue streams or complex financial arrangements.
Why Directors Who Ignore the £12,570 Rule Borrow More
The directors who secure the highest borrowing do not present themselves as low-income earners. Instead, they work with brokers who understand how to showcase the company’s financial strength. They provide comprehensive financials, certified income evidence, profit analysis, and structural clarity.
Directors who continue to think in terms of declared income are restricting themselves unnecessarily. Those who understand modern underwriting unlock lending based on true business performance—not a figure selected for tax efficiency.
This shift is particularly important for directors planning:
- property purchases
- refinancing
- equity release
- portfolio expansion
- SPV transfers
- development or investment activity
Borrowing based on genuine capacity rather than artificial drawings enables stronger long-term strategy and wider financial opportunity.
How to Position Income Properly in 2025
The key to unlocking higher borrowing in 2025 is presenting the company’s real financial capacity. Directors should ensure their accounts, retained earnings, liquidity and profit trajectory are clearly understood by the lender. Accountant-certified income may also be used to validate sustainable earnings.
Directors must also ensure clarity across multi-entity structures. Where a group generates consolidated profit, some lenders will assess the group holistically rather than isolating individual company performance.
Ultimately, the goal is to show that your drawings are not evidence of limited income—but evidence of tax strategy.
Hypothetical Scenario
A director takes a £12,570 salary and modest dividends totalling £18,000 annually. Their company produces £220,000 in net profit and holds £310,000 in retained earnings. A high-street lender evaluates income at £30,570. A specialist lender assesses the full profit and confirms the director could safely draw significantly more. The resulting borrowing capacity is more than double the high-street offer.
Outlook for 2025 and Beyond
The UK lending market is becoming increasingly sophisticated. As specialist lenders and private banks refine profit-based assessments, directors who understand modern underwriting will benefit the most. The £12,570 rule is already outdated, and by 2026, it will be largely irrelevant to director borrowing.
Directors who continue relying on salary-and-dividend assessments will experience limited borrowing, unnecessary declines and weaker outcomes. Those who embrace profit-based logic will unlock the full financial strength of their business.
How Willow Private Finance Can Help
Willow Private Finance specialises in profit-based, retained-earnings-driven and complex-structure lending for directors and business owners. As a whole-of-market broker, Willow matches clients with lenders who understand business performance, not drawings. Whether you operate a single company, multiple entities or an SPV structure, Willow positions your finances to secure the borrowing you are truly eligible for—not the borrowing your tax return suggests.
Frequently Asked Questions
Q1: Do lenders still rely on the £12,570 salary for directors?
Many high-street lenders do, but specialist lenders and private banks no longer assess income this way.
Q2: Can retained earnings help me borrow more?
Yes. Many lenders include retained earnings as part of affordability when supported by company accounts.
Q3: Do I need two years of accounts?
Not always. Some lenders use the most recent year, especially for growth businesses.
Q4: Will lenders accept accountant-certified income?
Yes. Many specialist lenders accept certified or adjusted income to reflect true profitability.
Q5: Are drawings a fair reflection of income?
No. Drawings are tax decisions—not indicators of affordability.
Q6: Can specialist lenders offer higher borrowing?
Typically yes, because they assess business performance rather than declared income.
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