Salary sacrifice rules mean that switching to an electric car has never been more attractive. Tony Byrne, managing director of Wealth & Tax Management, explains.
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SALARY sacrifice schemes allow employers to offer an attractive and cost-effective benefit to their employees which is HMRC and VAT compliant.
The electric car salary sacrifice scheme allows employees the opportunity to drive a brand-new, fully insured and maintained electric car for significantly less than if they leased one privately.
The scheme works in the same way as other salary sacrifice incentives such as childcare or cycle-to-work and has been designed to help transition more company car drivers from conventional to electric cars.
With just a 1% benefit in kind tax charge on zero-emissions company cars, there has never been a better time to drive an electric car for business.
What are the benefits of a salary sacrifice scheme for an employee?
A salary sacrifice scheme allows employees to drive a fully electric company car, by forgoing a portion of their gross salary. The amount will be deducted before tax and National Insurance contributions are applied. Tax savings for employees are significant.
What are the benefits of a salary sacrifice scheme for an employer?
A salary sacrifice scheme allows employers to offer employees a new car at a lower cost with a tax-efficient payment method. Additionally, the company may also benefit from reduced National Insurance contribution payments. Salary sacrifice schemes are HMRC and VAT compliant.
Who is eligible for salary sacrifice?
Eligibility for salary sacrifice is dependent on company policy. If an employer offers a salary sacrifice scheme, it’s available to employees with a permanent contract. Employees can learn more about eligibility from their employer.
How do you lease an electric car through a salary sacrifice scheme?
Ask your employer by contacting your Human Resources department or visit the HMRC website.
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KEY BENEFITS
To the employer
Increased employee engagement and retention
National Insurance Contribuion savings
Fully maintianed and insured company cars
Proven HMRC and VAT compliant scheme
Reduced fuel costs
No upfront costs
To the employee
Acess to a brand new electric car at low monthly contract hire rates
Significant National Insurance savings
No initial upfront costs
Flexible mileage and terms
Fixed cost motoring without unexpected bills or service costs
If you are interested in discussing ways to save business taxes and incentivise your staff, why not benefit from a one-hour Discovery Meeting either at our offices or by a video conference call at our expense worth £270 to each of the first three readers who contact us before 31 December 2021? You know it makes sense.
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The Financial Conduct Authority does not regulate tax advice.
The contents of this article are for information purposes only and do not constitute individual advice. All information is based on our current understanding of taxation, legislation and regulations in the current tax year. Any levels and bases of and relief from taxation are subject to change.
