Can I get a home loan with only one year of tax returns?

One of the most common roadblocks for self employed borrowers is the second year of tax returns. The standard expectation is two years, so a business that is doing well but is only a year or so old can hit a wall. The good news is that this is not always the end of the road.

The standard expectation is two years

Most lenders prefer two years of personal and business tax returns for a self employed applicant, because two years lets them see consistency and average the income. This is the default position across much of the market, and it is why the second year of returns matters so much.

Some lenders may consider one year

That said, some lenders may assess serviceability on just the most recent financial year rather than averaging two. This tends to be considered where the business is established, the income is steady or growing, and the overall application is strong. Whether a particular lender offers this, and the conditions they attach, varies, so it is not something to assume.

Why a lender might accept one year

A lender looking at a single year is essentially deciding that the most recent year is a fair reflection of your ongoing income. That is easier for them to accept where there is supporting evidence the income is sustainable, such as a track record in the same industry before going out on your own, or strong recent trading.

What can strengthen a one year application

Where only one year of returns is available, the rest of your file does more of the work. A solid deposit, clean credit, an established business, and an accountant who can speak to the income all help. Recent business activity statements or trading figures can also support the picture, depending on the lender.

It is not the same as low doc

Assessing one year of full tax returns is different from a low documentation loan, where income is verified through alternative evidence rather than full returns. A one year assessment still uses your actual lodged returns, just one year of them, so it is generally a more mainstream path than low doc, where it is available.

Policies vary and change

How lenders treat a single year of returns differs between lenders and can change over time. Being declined by one lender on this basis does not mean every lender would decline you, which is exactly the kind of situation where comparing lenders matters.

Get the right lender matched to your year

Because this depends so heavily on the individual lender and your circumstances, the useful step is to match your situation to a lender whose current policy fits, rather than apply broadly. A broker who works with self employed borrowers can identify which lenders may consider one year of returns for you, usually at no cost to you. This is general information, not advice, and your accountant should confirm how your income is presented.