Self employed car finance

• SA302 tax calculations for the last two tax years, downloadable from your HMRC account.
• Tax year overviews to corroborate the SA302s. Lenders normally want both.
• Three to six months of business bank statements showing regular income.
• Accountant-prepared accounts if you trade through a limited company.
• Proof of address and ID, plus electoral roll registration at your current address.

If you have been trading for under a year, one year of accounts plus strong bank statements will still get you considered by part of the market, but the panel narrows and a deposit becomes more important.

Sole traders are assessed on net profit after allowable expenses, not turnover. This is the most common surprise: aggressive expense claims reduce your tax bill and your assessable income at the same time.

Limited company directors are usually assessed on salary plus dividends. Some lenders will also consider retained profit where you own the majority of the company, which can significantly increase the figure they work from.

Contractors are often assessed on the day rate annualised, provided there is a current contract and a reasonable track record of renewals.

Where income varies year to year, most lenders take an average of the last two years, or the lower of the two if the trend is downward.

• Wait until the latest SA302 is filed if this year's figures are stronger.
• Put down a deposit. It reduces the credit needed and offsets income variability.
• Keep business and personal banking separate; mixed accounts slow underwriting.
• Clear or reduce short-term commitments before applying; they hit affordability directly.
• Use a soft search rather than applying to several lenders in turn.

If the car is used for business you may be able to claim part of the cost against tax, and the treatment differs between personal finance in your own name and a business contract in the company's name. Which is better depends on your profit level, the vehicle's CO₂ emissions and whether you want the asset on the balance sheet.

This is genuinely an accountant's question rather than a broker's, so get the tax position confirmed before you sign, because the agreement type is difficult to change afterwards.