How Lenders Typically Treat Commission — and Why It Disadvantages Borrowers
The way mainstream lenders treat commission income falls broadly into three categories, ranging from dismissal to partial inclusion to full assessment. Understanding where your current lender — or any lender you are approaching — falls on this spectrum is fundamental to knowing whether you are getting a fair assessment of your income.
The most restrictive approach, used by a significant number of high street lenders, is to ignore commission entirely and assess only the guaranteed base salary. For a salesperson earning £30,000 basic but consistently achieving £80,000 total compensation through commission, this means being assessed as if they earn £30,000. The mortgage they are offered reflects only 37% of their actual income — a fundamental misrepresentation of their financial position that results in borrowing limits that can be less than half what they could reasonably afford to repay.
A more common middle-ground approach counts commission but applies a discount — often 50% of the most recent year's commission, or an average of two years at a reduced rate. This is better than ignoring commission entirely but still systematically understates income for high-commission earners with consistent track records. A borrower who has earned £50,000 in commission for each of the past three years will find that 50% inclusion — counting £25,000 — still represents a 50% undercount of a genuinely reliable income stream.
Specialist lenders take the most rational approach: assessing commission income based on a evidenced track record without applying arbitrary discounts. A borrower with three years of consistent commission at or above a certain level provides strong evidence that the commission is sustainable. Specialist lenders will typically average this track record — sometimes weighting more recent years if income has been growing — and count the resulting average alongside the base salary for affordability purposes. This approach treats commission-earning borrowers fairly and in proportion to their actual earning capacity.
The practical consequence of lender selection is enormous. The same borrower, applying for a mortgage on the same property, can receive vastly different maximum loan offers depending solely on which lender assesses their income. A specialist broker who knows the commission income policies of dozens of lenders can identify the ones most likely to assess a specific borrower's commission history favourably and direct the application there rather than to lenders that will systematically undercount it.
What Evidence Do Lenders Need for Commission Income?
The core documentation for evidencing commission income is a combination of payslips and annual income summaries. Payslips covering the last 12 months are typically required, showing both the base salary and any commission payments clearly separated. Where commission is paid monthly, 12 months of payslips will show the commission pattern clearly. Where commission is paid quarterly or annually — as is the case in some sales roles — the payslips may not show monthly commission, and annual summaries or P60 documents become more important.
P60 end-of-year certificates show the total gross income paid by the employer in each tax year, including all commission payments. Lenders will use P60 documents for the last two or three tax years to calculate a commission average, which is then added to the evidenced base salary for affordability purposes. The P60 is important because it captures commission paid in previous years even where the individual no longer has every payslip from that period.
Bank statements showing the actual receipt of commission payments provide supporting evidence that complements payslips and P60s. Where commission payments are visible as distinct credits in the bank account — labelled with the commission month or payment reference — they confirm that the income declared on payslips is genuinely being received. Some lenders will want to see bank statements alongside payslips specifically to verify this.
Where commission is earned in unusual ways — for example, overriding commission in a multilevel sales structure, renewal commission from an ongoing client book, or performance bonuses that function like commission — it may be helpful to provide an employer's letter explaining the commission structure. This letter, signed by HR or payroll, can clarify how the commission is earned, whether it is discretionary or formula-based, and the basis on which historic payments can be expected to continue. For specialist lenders' underwriters who are unfamiliar with a particular industry's commission structure, this context can be decisive in how the income is treated.
