Contractor-friendly lenders annualise your day rate using a standard calculation: day rate x 5 days x 46 weeks. So a £500 day rate is assessed as £115,000 of income. They then apply an income multiple to that figure to set your maximum borrowing.
The 46-week figure builds in a realistic cushion for holidays, training and gaps between contracts, so the lender isn't assuming you bill every week of the year. It is the market-standard basis for day-rate assessment and a more robust measure than a naive annualisation.
As a guide, your annualised day rate multiplied by the lender's income multiple — commonly around 4.5 times, higher for some profiles. A £500 day rate (£115,000 assessed) supports roughly £517,000 at 4.5x. This is illustrative; your figure depends on your full circumstances and the lender's live criteria.
It depends on the lender, and the difference is large. Day-rate lenders assess the contract rate and ignore your drawings; accounts-based lenders read your declared salary and dividends. For a tax-efficient contractor the day-rate route usually produces far higher borrowing, which is why lender choice matters.
Commonly around 4.5 times the assessed income, with some lenders and profiles reaching higher, and enhanced schemes going further for qualifying first-time buyers. The exact multiple depends on income level, loan-to-value and your wider profile, and is confirmed at application.
At a day-rate lender, no — it assesses the contract rate regardless of what you draw, so keeping drawings low for tax efficiency does not reduce your borrowing. At an accounts-based lender your drawings would be the basis, which is why the day-rate route suits most contractors better.
A recent increase is generally good news — day-rate lenders assess the current contract, so a higher rate flows straight into your assessed income. Where an increase is very recent, some lenders may want to see it evidenced in the contract; we confirm the position for your case.
