Is PAYE income easier to get a mortgage with than self-employed income?

Generally, yes. PAYE income is straightforward for lenders to verify through payslips and P60s, and the assessment process is simpler. Self-employed applicants typically need more documentation (SA302s, Tax Year Overviews, accounts) and may face more scrutiny. However, being self-employed does not prevent you from getting a mortgage — it just involves more paperwork.

Do lenders include overtime and bonuses in PAYE income?

It depends on the lender. Most will consider regular overtime and contractual bonuses but may only include 50% to 100% of the amount, averaged over the last six to twelve months. Non-contractual or irregular bonuses may be discounted more heavily. Your broker can advise on which lenders treat variable income most favourably.

What is a P60 and do I need it for a mortgage?

A P60 is a certificate your employer gives you at the end of each tax year showing your total pay and the tax and National Insurance deducted. Most mortgage lenders require your latest P60 alongside recent payslips as proof of income. If you have lost yours, your employer can provide a replacement.

What is PAYE? Meaning Explained | My Mortgage Sorted

Pay As You Earn (PAYE) is the UK's system for collecting income tax and National Insurance contributions at source. If you are employed, your employer calculates the tax and NI due on your salary, deducts it before paying you, and sends the amounts directly to HMRC. This means most employees do not need to file a self-assessment tax return.

PAYE operates using a tax code assigned to each employee by HMRC. The tax code tells the employer how much of the employee's earnings are tax-free (the personal allowance) and at what rate to tax the remainder. If your tax code is wrong — for example, because you have changed jobs or have additional income — you may end up paying too much or too little tax.

From a mortgage perspective, PAYE income is the simplest type for lenders to verify. Your payslips and P60 (annual tax summary) provide clear evidence of your earnings. Lenders typically require three months' payslips and your latest P60. If your income includes overtime, bonuses or commission, lenders may average these over a longer period or only count a percentage.

Contractors working inside IR35 are paid through PAYE even though they are technically operating through their own limited company. This can affect how much they can borrow, as discussed under the IR35 entry.

Example

Lucy earns a gross salary of £42,000 per year. Her employer deducts income tax and National Insurance through PAYE, so Lucy receives approximately £2,700 net per month directly into her bank account. When applying for a mortgage, she provides three recent payslips and her P60. The lender uses her gross salary of £42,000 and applies an income multiple of 4.5, offering a maximum mortgage of £189,000.

Key Points

PAYE deducts income tax and National Insurance from your wages before you are paid
Most employees do not need to file a tax return because PAYE handles their tax
Mortgage lenders find PAYE income the easiest to assess and verify
You will typically need three months' payslips and a P60 for your mortgage application
Your tax code determines how much tax is deducted — check it is correct regularly