19 January 2022

Can You Lease a Van if You’re Self-Employed?

Van leasing is a great choice if you’re self-employed. If you’re unsure how it works, Leasing Options answers the key questions around sole trader van leasing while taking a look at the advantages and considerations.

If you run your own business and are searching for a work vehicle, then it might be time to look into sole trader van leasing. For the self-employed, a van lease comes with an array of benefits, including fixed costs and a full manufacturer’s warranty. Plus, with many tax advantages, it can be the more cost-effective option too.

In this guide, we’ll explain how sole trader van leasing works – including sole trader van lease tax rules, the advantages of leasing, and what documents you’ll need to provide to get a self-employed van lease.

How Does Van Leasing Work When I'm Self-Employed?

You might be surprised to know how easy it is to obtain a self-employed van lease – and how cost effective. With sole trader van leasing, you can lease one or multiple vans for a fixed period of time, normally between 2-4 years. You’ll pay an initial rental fee upfront, which is considerably lower than the expensive one-off payment or deposit for purchasing a van.

After that, you’ll make fixed monthly payments until the end of your contract. At that point, you return the van(s) to the leasing company. You can then use this as an opportunity to upgrade to a brand-new model for your next lease.

To ensure you’re eligible for van leasing, you’ll be subject to a credit check, as the finance company will need to be assured that you can afford the monthly payments. Your credit score will be examined by our funding panel, which will examine your credit history to see, for example, how often you made late payments, how late these payments were, and whether any debts were left outstanding. Whilst the guidelines used by each company are different, they will generally be looking for a high credit score.

Will I Have to Pay Company Van Tax?

No, there’s no ‘sole trader van lease tax’. If you’re a sole trader, you don’t have to pay company van tax. That’s because as a sole trader, you and your business are considered one and the same – so you’re not classed as an employee using the van as a company perk.

Plus, there are some tax benefits to sole trader van leasing. If your business is VAT registered and you use the van only for business, you can claim 100% VAT back from your monthly payments. Your rental payments can also be classed as a tax-deductible expense.

Can I Still Lease a Van with Bad Credit?

This will depend on your exact credit rating and your provider. While you can lease a van with bad credit, it can make it more challenging to obtain a lease. There are many ways to improve your chances, though.

For one thing, your personal credit rating and business rating are considered separately. So, if your business credit is poor, but your personal credit is good, this can contribute to your eligibility. You should also make sure you’re on the electoral register.

Ultimately, the best option is to improve your credit rating. You can do this by:

  • Ensuring you pay any current monthly payments, such as a mortgage
  • Clearing your credit card debt and paying any outstanding bills
  • Avoiding going into your overdraft

If you don’t have much credit rating at all, it can help to take out a credit card and use it for regular business purchases that you pay off in full each month.

What Documents Will I Need to Provide?

There are several main pieces of information that you’ll need to provide as part of the self-employed van lease application process. These will include:

  • Personal information: full name, date of birth, marital status, address, property status and history
  • Business information: name of the business, address, date of establishment, contact details, annual turnover, company registration numbers, details about the type of business
  • Business bank account information: bank name and address, along with account details

Through this information, the financing company will be able to complete a credit check to ensure you are eligible for finance. In conjunction with this, you may also be asked to provide recent bank statements, your latest accounts, and proof of address or ID.

Advantages of Sole Trader Van Leasing

If you’re wondering whether to choose a self-employed lease or buy a van, then it might help to consider the benefits of sole trader van leasing. These include:

  • No big costs – Van leasing means no giant up-front costs making a dent in your bank account. Instead, you’ll pay a small initial fee, followed by monthly rental payments
  • Fixed payments – Budgeting is made easy with the fixed monthly payments, especially when you add maintenance onto your lease, eliminating sudden bills
  • Flexibility – You can tailor the contract length and mileage allowance to suit your needs
  • No hassle – As the finance company owns the van, there’s no need to worry about the value depreciating and you won’t have the hassle of selling the van once your lease ends
  • Upgrading – Because you’re leasing the van, it’s easy to upgrade every few years
  • Taxes – As you won’t own the van, you won't have to pay road tax whilst you’re on the lease. Plus, as a sole trader, you won’t be liable to pay company van tax, and if you’re VAT-registered, you’ll be able to claim back 100% VAT.

Browse the full selection of our sole trader van leasing deals to find the perfect van. Or, if you’d like to know more about our van lease packages, why not get in touch today?

Which Vans Are Best If I'm Self-Employed?

The right type of van for you will depend on the trade you work in and the amount and size of materials you use. If you need something more compact and don’t have any large equipment to lug around, then a small van, like the Volkswagen Caddy or Ford Transit Courier, could be the best choice. These are great for florists as well as electricians or plumbers.

If large equipment is key to your trade, then chances are you’ll need something more spacious and with a larger loading bay. Popular large vans include the impressive Mercedes Sprinter. If you’re looking for something in the middle, a medium-sized van, also referred to as a ‘builder’s van’, might be the best choice for you. These types of vans are perfect for a wide range of trades, with popular models including the Renault Trafic, Ford Transit Custom and Volkswagen Transporter.

There are also specialist vans to consider, including refrigerated vans, Dropside vans and Luton vans, depending on the requirements of your trade.

Sole Trader Van Leasing FAQs

Can I Lease a Van If I'm Self Employed?

Absolutely! In fact, there are many benefits to a self-employed van lease. You’ll enjoy tax advantages, smaller monthly payments, a full manufacturer’s warranty, the opportunity to upgrade to the latest vans every few years, and fixed costs. Plus, there’s no huge up-front payment to set your business back.

Is Leasing a Van Tax Deductible for Sole Traders?

Yes, business van leasing is tax deductible for sole traders. You can claim your van leasing and fuel as allowable expenses on your tax return. Plus, if you’re VAT-registered and your van is used purely for work purposes or as a pool van, then you’re entitled to reclaim 100% of the VAT. If you also use the van for private journeys, then this is lowered to 50%.

Plus, there’s no ‘sole trader van lease tax’, so you won’t need to pay company van tax. That’s because, as a sole trader, you and your business are considered one and the same, rather than you being an employee using the van as a company benefit.

Can You Claim for Buying a Van When Self-Employed?

Yes, if you decide to buy a van for your business, you can claim this on your tax return. The way that you claim it will differ depending on how you pay your tax. If you use traditional accounting, then you can claim your commercial van as a capital allowance. If you use cash basis accounting, you’ll need to claim the van as an allowable expense.

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