Car leasing is a great option for self-employed individuals and sole traders. This agreement works in a similar way to business leasing, but there are a few differences to be aware of.
In this guide, we cover how self-employed car leasing works, including tax benefits, advantages of leasing and what you'll need to secure finance.
So, if you need a company car for your business, take a look at how this option could help you.
Yes, absolutely. Self-employed people and sole traders qualify for business leasing agreements as they fall into the eligible business categories. The most common type of business lease for the self-employed is Business Contract Hire (BCH).
This is similar to personal car leasing as you agree to lease a car for a fixed duration and monthly charge, and at the end of the contract, you hand the vehicle back.
Use our car matching tool to find a flexible solution to meet your leasing budget. Click more options to narrow down the search results.
You must be classed as self-employed or a sole trader to be eligible for a self-employed car lease. The basis of this covers people that:
In addition to meeting the self-employment classification, a good or excellent credit score is typically needed for a successful application. Newly self-employed people are also not excluded from business leasing, but you may have to provide extra documentation or proof of income during the leasing process.
The process of getting a self-employed car lease is similar to other business leasing agreements. At Leasing Options, you also benefit from a dedicated Account Manager who can guide you through the necessary steps.
Here's what to expect when applying for a car lease:
First, choose a lease vehicle from the wide selection of business leasing deals available on the website. There is a vast range of models to choose from, including electric and hybrid cars.
Once you’ve decided on the car, choose your contract duration, mileage allowance and extras you require and request a quote.
When you’ve received the quote, your Account Manager will take you through the finance proposal form to help you get the best deal for the lease. At this point, a credit check is performed to determine your suitability.
With your finance agreement ready, it's over to you to sign, then the contract is completed. In many cases, this will be emailed to you to speed up the process.
In-stock lease vehicles are typically delivered within two weeks from the completion of the finance agreement. However, if your car is out of stock, your Account Manager will contact you once it's available to arrange delivery.
For more information on the process of leasing, check out our business leasing guide.
When completing your self-employed car lease, you'll need specific information to support your application. This includes:
Learn more in our How To Get a Business Car guide.
Self-employed individuals enjoy a host of business leasing benefits when choosing this lease option. These include the following:
Fixed instalments agreed upon at the start of the contract help you to budget effectively and manage motoring costs easily. These payments are also tailored to the type of car you lease and how long you lease for. So you can choose a cost-effective option to meet your needs.
All business car leases come with Vehicle Excise Duty (VED) or, as it's otherwise known, road tax included.
You always get a brand-new vehicle with a lease agreement, so you have access to various models with the latest technology, including electric cars.
As you're not buying the car outright, you don't have to worry about its depreciation or the resale value.
If your business is VAT-registered, you can claim up to 100% of the VAT back on monthly instalments.
The cost of your monthly instalments and any packages, such as maintenance, can be claimed as a business expense. This makes it more appealing to sole traders than personal leases.
Every lease car comes with a full manufacturer's warranty and typically covers the whole of your lease period, so you have extra peace of mind if anything goes wrong.
There are also a few considerations to make before choosing a self-employed lease agreement, including:
Yes! One of the main benefits for self-employed businesses is the tax benefit that comes with this type of lease. There are a few different ways you can reclaim tax, including:
The costs of your monthly instalments and the initial rental payment can be classed as a business expense in your self-assessment tax return. This means you can write off the full amount against your tax bill.
If you're VAT-registered, you can also claim up to 100% of the VAT back on your monthly instalments. If you use the car for personal reasons as well as business, you can reclaim 50% back. But if the vehicle is solely used for company reasons, you can claim 100% back.
For more information on tax benefits, learn more in our guide to car lease deductibles.
Yes, you can claim mileage back. However, the process differs slightly from if you were claiming back mileage using a personal lease.
For business leases or company cars, mileage is reclaimed using a Fuel or Mileage Allowance. This is where you calculate vehicle expenses based on a flat rate the HMRC sets.
This is referred to as Simplified Expenses, and there is a set amount depending on the miles travelled.
| Vehicle | Flat rate per mile with simplified expenses |
|---|---|
| Cars and goods vehicles first 10,000 miles | 45p |
| Cars and goods vehicles after 10,000 miles | 25p |
However, it's important to note that HMRC states you cannot use this method “for a vehicle, you've already claimed capital allowances for, or you've included as an expense when you worked out your business profits”.
Self-employed people and sole traders are exempt from paying company car tax, as there is no difference between you and your organisation.
Exemptions from company car tax also include:
If you decide to change the status of your business to a Limited Company (LTD), you will have to pay Business in Kind (BiK) tax based on the vehicle's emissions.
Check out our Company Car Tax guide for more information on Benefit in Kind tax.
Business lease cars can be used for private journeys, including commuting to work. However, there are some aspects to consider when using it for this reason. For example, you can only claim 50% of VAT back if you're VAT-registered.
This option is typically more appealing than a personal lease, as in that agreement, you can only use the car for private use, and it is not tax deductible.
If you're considering whether to buy or lease a car, it's best to compare the benefits of each option first. For example:
Of course, there are also drawbacks to consider, especially with buying outright, such as the significant initial outlay, depreciation and resale value, higher maintenance costs and less flexible finance options.
Overall, there are often many more benefits of opting for a self-employed lease car as it provides a cost-effective and affordable business travel solution.
There is no set figure on how much a business needs to make before applying for a lease. However, it's important to consider that a finance company needs proof you can comfortably meet the monthly payments for the agreed term.
Your credit report will also support your income status, and there are also other options for securing a lease depending on your financial situation, such as:
Most leasing companies typically permit signage and branding. However, you must ask permission before adding anything to the vehicle. Finance firms understand that business cars may require signage, but there may be stipulations for modifying the vehicle.
As part of the fair wear and tear policy, at the end of the contract, the car needs to be returned as it was initially leased. So, signage must be removed by a professional to avoid damage.
If you're interested in leasing a car and are self-employed, our team can help guide you through the process. Contact us for a quote.
Leasing Options understands waiting for a new car isn't always possible. Maybe your lease is ending or your car is old, or you like new models. Regardless, we offer in-stock car leases to meet your needs, which could be delivery within as little week.
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