Self Employed Leasing Guide

More and more people are preferring to work for themselves, either as independent contractor or owners of small enterprises. This surge comes as no surprise given the growth of start-ups and the acceptance of the digital age.

Car leasing (or van leasing) for the self-employed is naturally if you work for yourself and it's possible that you'll need a car or van. You may wonder if it's possible for you to lease a car through a business lease rather than a personal lease.

This article examines car leasing (or van leasing) for the self-employed. We'll also examine your business options, the requirements, and the advantages of leasing from a business perspective as well as personally.

What is classed as Self-Employed?

Firstly, let's confirm that you are qualified to classify yourself as a sole proprietor or self-employed person.

You are immediately classified as a sole trader when you embark on the journey of working for yourself, whether or not you have notified the HMRC.

An individual is considered self-employed if they:

If they run their business for themselves and take responsibility for its success or failure.

Self-employed workers aren’t paid through PAYE. Someone can be both employed and self-employed at the same time.

Fixed fees for their job are agreed upon with clients or employers.

Work for a variety of clientele.

What are the advantages of leasing for businesses?

Leasing through your company has several advantages, whether you're self-employed or not, which explains why it's so common. For instance:

If your company is registered for VAT, you can deduct 50% of the VAT on a car.

You can deduct all of the VAT if you own a van.

Finance commitments for vehicles under Contract Hire or Operating Lease may be "off balance-sheet."

If you finance your car, the financial obligations are "on balance-sheet."

Your funds won't be invested in a declining asset.

Because payments are predetermined each month, budgeting is made simple.

Typically, vehicle excise duty is present.

When is leasing a business vehicle preferable than leasing a personal vehicle?

If you are VAT registered at the standard rate (because you will benefit more and be able to deduct VAT costs related to the lease),

If your company can afford to cover all related operating costs (fuel, servicing, maintenance, repairs, and replacements etc.)

If you're willing to drive a car with low CO2 emissions, a hybrid, or an electric vehicle (as there are even more cost-effective business tax benefits for choosing low emission vehicles)

Leasing personal vehicles for the self employed

When a lease contract is signed in an individual's name (rather than that of a business or company), it refers to the leasing of a car or van for personal use. In this case, the vehicle may be utilised for both business and/or personal purposes.

When a lease contract is signed in an individual's name (rather than that of a business or company), it refers to the leasing of a car or van for personal use. In this case, the vehicle may be utilised for both business and/or personal purposes.

If the P11D value and/or CO2 emissions band of your desired vehicle is high (as the tax payable by your business will be high and you may have to pay more tax this way. With personal lease, simply reclaim the business mileage)

If you fall into the 40% tax bracket for higher-rate taxpayers (This may be less tax beneficial for you than taking a personal vehicle lease)

Do self-employed people have to pay company car tax?

Which is better, leasing through your company or leasing on your own? For independent contractors who want to lease a car, there are numerous choices.

Most of the time, we advise going through with your company if you can. This is because of the advantages that come with a business lease.

Since you are not required to pay Company Car Tax if you are self-employed, business leasing may seem more enticing to single proprietors.

Eligibility for car or van leasing

The self-employed/sole trader/partnership will need to submit some or all of the following documentation as proof of eligibility as part of the application procedure for business vehicle leasing:

ID and address verification

Recent bank statements

Applications for business vehicle leases from sole proprietors, partnerships, and self-employed people are also subject to a personal credit check (in the case of partnerships, all partners must provide their personal information). This is done to help determine the applicant's creditworthiness and risk profile.

In certain situations, we might also need one or more of the following:

Last three months' worth of business bank account statements

Last tax filing

Last set of trading accounts

You will be in a fantastic position to choose between a corporate vehicle lease and a personal one if your credit check is successful. If this is the case, it becomes useful to speak with your accountant or financial advisor to learn more about how the two options can affect your personal and business tax situations differently.