Meet James.
He’s a tech contractor working through an umbrella company, earning a healthy day rate, but he’s just been told by his bank that he doesn’t have a “real” income.
Sound familiar?
If you’re a contractor under IR35 and trying to get a mortgage in the UK, you’re probably realising the traditional rules don’t quite fit.
Let’s break down what’s actually going on and how you can get approved.
IR35 101: How It Impacts Your Earnings
IR35 was designed to make sure contractors working like employees pay the same tax as employees. If you’re caught by it, i.e. “inside IR35”, you usually work via an umbrella company or have tax and NIC deducted at source.
The upshot? Your take-home pay looks lower on paper.
And because most lenders base mortgage affordability on income, this can throw a spanner in the works. Even if your gross contract rate looks impressive, being inside IR35 can muddy how lenders assess what you actually earn.
What Lenders Look For: The Key Criteria
Here’s what mortgage lenders usually want to see from contractors:
- Proof of income: usually your current contract, payslips (if under umbrella), or invoices (if outside IR35).
- Contract history: ideally 12+ months of continuous contracting, or proof of renewals/extensions.
- Length of current contract: the longer left to run, the better. Some want 3+ months remaining.
- Track record: evidence that you’ve been working in your field for 2+ years.
- Deposit and credit: a solid deposit (10–15%) and clean credit history will strengthen your case.
Not all lenders treat contractors the same. Some won’t deal with umbrella workers at all.
Others, especially specialist lenders or broker-only options, have criteria tailored for IR35 contractors.
Calculating What You Can Borrow: Day Rate & Affordability
For contractors, income isn’t always about payslips. Lenders who “get” contractor mortgages often use your day rate to work out how much you can borrow.
Here’s the typical calculation:
Day rate × 5 days/week × 46-48 working weeks = Annualised income
So, if you earn £450/day:
£450 × 5 × 46 = £103,500 annualised income
Lenders may then offer between 4 and 5 times that figure, depending on your situation. That could mean a potential mortgage offer of £414,000-£517,000, even if your umbrella payslips only show net earnings of £60K.
However, this only works if you’re with a lender that understands how contracting works. Some mainstream banks might just look at your payslips like any other employee, but others do use day-rate calculations if you fit their contractor criteria.
Different Contractor Types & Their Mortgage Paths
Whether you’re inside or outside IR35 affects how your income is structured and which lenders you can go to.
Umbrella Contractor (Inside IR35)
- Paid PAYE with deductions
- Need payslips and sometimes P60
- Treated more like an employee by lenders
- Some lenders won’t accept umbrella roles
Limited Company Director (Outside IR35)
- Often more tax efficient
- Can be assessed via salary + dividends or day rate
- May need company accounts, SA302s, and tax calculations
- More lender flexibility (especially specialist ones)
Fixed-Term Contractor (e.g. NHS, IT)
- Often treated like employed roles
- May qualify for contractor-friendly mortgage terms
No matter your setup, the key is choosing a lender (and broker) who understands your income structure, not just the payslip.
Common Pain Points & How To Overcome Them
| Pain Point | What You Can Do |
| Bank doesn’t accept umbrella income | Use a broker who works with contractor-savvy lenders |
| Only just started contracting | Show industry experience + secure contract + explain future pipeline |
| Big drop in income due to IR35 | Use day-rate annualisation instead of net PAYE income |
| Poor credit score | Focus on cleaning up your credit, or apply with a co-applicant |
| Deposit is tight | Explore shared ownership, family support, or first-time buyer schemes |
Checklist for Your Application
Before applying, get your documents in order. Here’s what you’ll likely need:
✅ CV showing work history
✅ Details of your deposit and any debts
✅ Your current contract (with start/end dates and daily rate)
✅ Last 3-6 months of bank statements
✅ Payslips or invoices (depending on setup)
✅ ID, proof of address, and credit report
Final Words
All is not lost!
Just because you are a contractor under IR35 does not mean owning a home isn’t for you. It all comes down to three key things. The right paperwork. The right lender. The right advice.
This is a likely recipe for success, turning a ‘computer says no’ into a ‘YES!’…
Contractor mortgages in the UK are a super specialist area, but you don’t need to know every in and out, just work with someone who does. Reach out to speak to our specialist team, fully equipped to guide you.
