Mortgage question
How do UK lenders count bonuses, commission and overtime in 2026?
Most UK lenders in 2026 use 50–100% of regular bonus or commission averaged over 2 years, 60–100% of overtime, and 100% of guaranteed contractual allowances — but discretionary annual bonuses are typically haircut to 50% and irregular commission to as little as 25%, which can swing borrowing capacity by £30,000–£60,000.
Why do lenders “haircut” variable income?
Because a mortgage is priced on the likelihood you’ll still be able to pay in year seven, not year one. A £20,000 annual bonus paid for three years running looks durable — so lenders will count most of it. A one-off £20,000 signing bonus from a new job doesn’t, and a discretionary bonus that halved last year is treated as half again. The “haircut” is the lender’s estimate of what income will persist, and different banks land on very different numbers.
How does each type of variable pay get treated?
| Income type | Typical treatment | Notes |
|---|---|---|
| Basic salary | 100% | The anchor figure — all other pay is stacked on top |
| Contractually guaranteed bonus | 100% | 2-year average; proved via contract + payslips |
| Discretionary annual bonus | 50–60% | 2-year P60 average; Nationwide 100% if regular, HSBC caps at basic |
| Regular commission | 50–100% | Halifax 60%; Santander 100% if paid monthly for 2+ years |
| Irregular / one-off commission | 25–50% | Often excluded entirely if frequency is uneven |
| Guaranteed overtime | 100% | Must be in the contract or confirmed by employer letter |
| Non-guaranteed overtime | 50–60% | Averaged over 3–12 months |
| Shift / London weighting | 100% | If contractually required, otherwise 50% |
| Car allowance | 50–100% | Lenders vary widely; Nationwide 100%, others 50% |
The specific lenders mentioned in brokers’ cheat-sheets for 2026:
- Halifax — 60% of 2-year average bonus and commission; 100% of guaranteed overtime.
- Nationwide — 100% of guaranteed bonus, 50% of discretionary, 100% of regular commission.
- HSBC — 50% of bonus capped at basic salary; 50% overtime.
- Santander — 100% of regular monthly commission over 2 years; 50% of annual bonus.
- Barclays — 60% bonus; 100% regular overtime.
- NatWest — 50% bonus, 50% commission, 50% overtime (conservative end of the market).
Worked example: how much difference does it make?
Take an applicant earning £55,000 basic plus a £15,000 annual bonus paid each of the last two years.
- HSBC at 50% bonus capped at basic: income = £55,000 + £7,500 = £62,500. At 4.5×, loan ceiling ~£281k.
- Nationwide at 100% regular bonus: income = £55,000 + £15,000 = £70,000. At 4.75×, loan ceiling ~£332k.
- NatWest at 50% bonus: income = £55,000 + £7,500 = £62,500. At 4.49×, loan ceiling ~£281k.
Same pay, same applicant — a £50,000 difference in maximum loan depending on which lender sees the file. That’s why brokers ask for your P60s before recommending a lender, not after.
What documents prove variable income?
Standard ask for an employed applicant with bonus or commission:
- Last 2 P60s (annual)
- Last 3 months’ payslips
- Sometimes a letter from HR confirming the bonus scheme, payment frequency, and whether it’s contractual
- For commission-heavy roles, a P11D or scheme document is occasionally required
For self-employed commission earners, the relevant question sits under self-employed affordability.
The misconception that costs borrowers the most
People under-declare variable pay because they assume lenders will reject it. They won’t — they’ll just haircut it. Declaring £55k + £15k bonus and letting Nationwide use 100% of the bonus gives you a materially higher ceiling than declaring only the £55k base. The risk is the other way: overstating a discretionary bonus that has actually been paid for only one year (lenders need two years’ evidence, and they’ll spot it on your P60s). Gather your P60s and payslips before you apply, share the full picture with a whole-of-market broker, and let them pick the lender whose haircut works hardest for your shape of income.
This is information, not regulated advice. Lender policies on bonus and overtime are updated frequently — check current criteria before applying.
Sources
Information, not regulated advice. Mortgage Notes is not an FCA-authorised mortgage adviser. For a recommendation on your specific circumstances, speak to an FCA-authorised broker.