How contractor income is calculated: the 46-week rule
Where the 46 weeks comes from
It is a deliberate haircut, not an estimate of how much you work. A full year is 52 weeks; the convention assumes you bill roughly 46 of them, which builds in an allowance for holiday, illness and the gaps between engagements. In effect the lender applies a discount before applying its multiple.
That matters when you compare quotes. A lender using a lower number of weeks is not being more accurate, it is being more cautious — and the difference flows straight through to your borrowing figure. It is worth knowing which convention a lender applies before assuming its answer reflects your earning power.
What the formula does not capture
Several things, and they can move the figure in either direction. Bonuses or overtime outside the contracted rate are usually excluded. Expenses billed on top are generally disregarded. And if you work fewer than five days a week, the calculation should reflect that — annualising a four-day contract at five days overstates your income and will be corrected at underwriting, not before.
On the other side, a retained-profit assessment can produce a higher figure for an established director than the day-rate route does. The two are separate bases and it is worth modelling both rather than assuming the contract route is automatically better.
Specialist lenders calculate a contractor’s income as day rate × days worked per week × 46 weeks, then apply an income multiple — usually 4.5×. A £500 day rate becomes £115,000 a year and supports roughly £517,500 of borrowing, before deposit and affordability checks.
It is the single most important number in contractor lending, and the one high-street calculators get wrong. Understand it and you can estimate your own borrowing in seconds — and spot immediately when a lender is undervaluing you.
The formula, visualised
Why 46 weeks, not 52?
No contractor bills every week of the year. Capping the calculation at 46 weeks bakes in a six-week allowance for holidays, illness and the natural gaps between engagements. It is a conservative, sustainable view of your income — which is exactly why lenders trust it and why it holds up at underwriting.
Worked examples at common day rates
| Day rate | Annualised (×5×46) | Borrowing at 4.5× |
|---|---|---|
| £300 | £69,000 | ≈ £310,500 |
| £450 | £103,500 | ≈ £465,750 |
| £500 | £115,000 | ≈ £517,500 |
| £650 | £149,500 | ≈ £672,750 |
Figures are indicative and modelled at a 4.5× multiple. The final amount depends on the lender, your deposit, credit profile and commitments.
- The formula is day rate × days per week × 46 weeks, then × the income multiple.
- 4.5× is the common standard; some lenders reach 5× or more, others sit at 4× for high loan-to-value.
- The 46-week cap is a buffer, not a penalty — it makes your income sustainable on paper.
- It uses your gross rate, so it reflects far more than a tax return would show.
How this beats a self-employed assessment
A standard self-employed assessment uses net profit from your SA302 — after expenses and tax planning — which routinely understates a contractor’s real earnings. The 46-week method sidesteps that entirely by reading your live contract. For more on why the tax return misleads, see our guide on getting a mortgage without an SA302, and if you trade through a company, retained profit mortgages.
Try it with your own rate
The calculator below runs the same formula live.
The 46-week rule, answered
What is the contractor income formula?+
Day rate × days worked per week × 46 weeks. A £500 day rate over five days is £115,000 a year. Lenders then apply an income multiple — usually 4.5× — to set the maximum borrowing.
Why do lenders use 46 weeks instead of 52?+
The six-week reduction is a deliberate buffer for holidays, illness and gaps between contracts. It keeps the assessed income sustainable across a realistic working year rather than assuming you bill every single week.
What if I work four days a week?+
The calculation is pro-rated: a £500 day rate over four days is £500 × 4 × 46 = £92,000. Some lenders will consider a higher day count if your contract genuinely supports it.
Is the day rate taken before or after tax?+
Before. Contract-based assessment uses your gross contract rate, which is the figure that reflects your true earning power — not your take-home after tax and expenses.
What if I work a four-day week?+
The calculation should use four days rather than five, which reduces the annualised figure proportionally. Some borrowers are quoted on a five-day assumption and then find the offer corrected at underwriting, which is an avoidable disappointment. State the actual pattern up front so the figure you plan around is the one you will be offered.