Bonus, Commission and Overtime: How Lenders Really Treat Variable Income

There is a conversation we have most weeks. Someone tells us they earn £58,000. We look at the payslips and their basic salary is £41,000. The rest is bonus, commission, overtime or shift enhancements. Both numbers are true. The problem is that lenders do not treat them as the same thing, and the gap between the two can decide whether a purchase works.

At Drummonds Finance Group, we handle variable income cases every week for employed borrowers across the UK. This guide explains how bonus, commission and overtime are actually assessed, what evidence you will be asked for, and why the same payslips can produce wildly different offers from one lender to the next.

Why lenders discount variable income at all

A basic salary is contractual. It arrives whether the company has a good year or a bad one. Bonus and commission are not guaranteed in the same way, and overtime depends on shifts being available. Lenders are trying to work out what you will still be earning in three years, not what landed in your account last March.

So most of them apply a haircut. Some take half of your variable income. Some take all of it. Some average the last two years and use whichever is lower. Some ignore it entirely if it has not been consistent. None of them is wrong exactly; they are just making different judgement calls about risk, and those calls are what create the spread in offers.

The practical consequence is that shopping around is not optional when your income is variable. It is the whole game. Our guide to how much you can borrow covers the general affordability picture, but variable income is where the standard calculators fall apart.

Bonus income

Annual bonuses are the most commonly discounted. A typical approach is to take an average of the last two years and count somewhere between half and all of it. If your bonus has grown sharply, averaging drags you down. If it dropped last year, most lenders will use the lower figure rather than the higher one.

Quarterly and monthly bonuses are often treated more generously, because regularity looks more like salary. If you are paid a monthly bonus that has appeared without fail for two years, there are lenders who will count a much larger share of it than they would for a single annual payment.

One thing worth knowing is that the wording on your payslip matters. A payment labelled bonus and a payment labelled commission can be assessed under completely different rules at the same lender, even where the money arrived for the same reason.

Commission

Commission tends to be viewed more favourably than bonus, particularly where it is a regular part of how a role is paid. Sales roles, recruitment, estate agency and financial services all fall into this bracket.

Where lenders differ most is the period they look at. Some want two full years and will average them. Some will take the last three months, multiply up and use that, which is excellent news if you have had a strong recent run and poor news if you have not. A few will use the last twelve months only.

If your commission is climbing, finding a lender that uses a recent short window rather than a two-year average is often worth more than chasing a slightly better interest rate.

Overtime

The dividing line here is guaranteed versus non-guaranteed. Contractual overtime, where your contract commits the employer to a certain amount, is usually treated close to basic salary. Non-guaranteed overtime is where the discounting happens, and it is where a lot of applications quietly lose thousands of pounds of borrowing capacity.

This affects some professions far more than others. NHS staff picking up extra shifts, emergency services, logistics, manufacturing and hospitality all commonly have a large non-guaranteed component. If that is you, our page on NHS staff mortgages covers the lenders who take a more sensible view of enhancements and bank shifts.

Airline crew face a version of the same issue with flying pay and allowances, which we cover on our mortgages for pilots and airline staff page.

Shift allowances, car allowance and everything else

Beyond the big three, there is a long tail of payments that get treated inconsistently. Shift allowance, unsocial hours enhancements, London weighting, on-call payments, car allowance and second job income all sit in this category.

Car allowance is a good example of how much variation there is. Some lenders count it in full as income. Some ignore it completely. Some count it but then treat it as a committed expenditure, which cancels most of the benefit. If you have a £6,000 car allowance, that single criteria difference is worth roughly £27,000 of borrowing at a four and a half times multiple.

What evidence you will need

Expect to provide more than a borrower on a flat salary would. Three months of payslips is the standard request, though six months is common where income is variable. You will also need your most recent P60, and often the previous one as well, so the lender can see two full years. Bank statements are usually asked for so the payments can be matched against the payslips.

The one people forget is the employer letter, and it is often the piece that unlocks a better outcome. A line from HR confirming that overtime is a regular expectation of the role rather than an occasional extra, or that a bonus is contractual rather than discretionary, can change how the whole case is assessed.

Gaps and inconsistencies cause problems. If there is a month where the bonus did not appear, be ready to explain why. Underwriters are not looking for a reason to decline, but unexplained gaps invite questions and questions cost time.

Where higher income multiples come in

If your total income is strong but the variable element is being discounted, there is sometimes a second route worth exploring. A handful of lenders offer enhanced income multiples for certain professions or above certain income thresholds, which can partly offset the discounting. We cover this on our 5x and 6x salary mortgages page.

It is not a fix for everyone, and a higher multiple on a discounted income can still land you below a standard multiple on a generously assessed one. The point is that there are two levers rather than one, and the right combination depends entirely on your figures.

If you are self-employed instead

This article deals with employed borrowers. If your variable income comes through your own company or as a sole trader, the assessment works on an entirely different basis, and we have covered that separately in how lenders really assess self-employed income. Contractors sit somewhere between the two and are often best served by lenders with specific contractor criteria rather than either standard route.

Practical steps that actually help

Do not rely on an online affordability calculator. Almost all of them assume a single salary figure and will either flatter you or write you off, and neither outcome is useful when you are trying to plan.

Get your last two P60S and three to six months of payslips together before you speak to anyone. With those in front of us, we can work out what each lender will count, rather than guessing at it.

Think about timing. If your bonus lands in April and your last two years show growth, applying in May with a fresh P60 can be worth considerably more than applying in March on older figures.

And be honest about what is likely to continue. If you are about to move to a role with a lower variable component, that matters, and it is far better handled at the start than discovered at underwriting.

Frequently asked questions

Will lenders count all of my bonus? Rarely. Most take between half and all of a two-year average, and a few will disregard it entirely if it has not been consistent. The variation between lenders is the whole reason it is worth comparing properly.

Does non-guaranteed overtime count at all? Yes, with most lenders, but usually at a reduced rate. Some are considerably more generous than others, particularly with NHS and shift-based roles.

I have only been in the job a year. Is that a problem? Not necessarily. Some lenders will use a shorter history, especially where you have moved within the same industry, or the commission structure is contractual.

Does a car allowance help my borrowing? It depends entirely on the lender. Some treat it as income, some ignore it, and some count it as income then deduct it as an expense, which leaves you no better off.

Can I use a second job? Often yes, provided it has been running long enough and the hours are realistic alongside your main role. Lenders will look at whether the two jobs are sustainable together.

Talk it through

Variable income is one of the areas where whole-of-market advice earns its keep, because the answer genuinely does depend on which lender is looking at your file. We deal with bonus, commission and overtime cases every week across the UK, from first-time buyers to people remortgaging onto a new deal.

If you want to know what your real borrowing figure looks like rather than the one a calculator gives you, get in touch or call 0330 1330034 and we will tell you straight if the numbers do not work. You may also find our most asked mortgage questions useful, and if you are buying for the first time, our first-time buyer mortgages page is a good place to start.