Salary Sacrifice Meaning
What is a Salary Sacrifice Car Scheme?
A salary sacrifice car scheme is a highly tax-efficient way of purchasing a new vehicle that provides many benefits to both the employee and the employer. It works in a similar way to childcare vouchers, Cycle to Work schemes, and pension contributions.
By sacrificing a portion of your pre-tax (gross) salary, you can get behind the wheel of a new vehicle at a great price. A salary sacrifice scheme involves all employees of a business, not only those who are entitled to a company car.
At Dick Lovett, our knowledgeable Corporate Team is always on hand to help you find the perfect vehicle for you at the best possible price. Whether you are after an electric car on a salary sacrifice scheme, or a petrol or diesel vehicle, contact our team today to explore your salary sacrifice options.
What can I expect on a salary sacrifice car scheme?
While there are numerous salary sacrifice scheme providers for businesses to choose from, you can expect to find similar benefits across the board.
Working with our salary sacrifice partners, we can find a scheme that perfectly fits your business needs. Whether you choose to expand your business fleet with an internal combustion engine, plug-in hybrid or fully electric vehicles, we are here to help. However, there are now more incentives than ever to make the move to electric.
In addition to the finance of the new vehicle, all maintenance, insurance, an optional home charger (if electric), and potentially even free public charging time across popular charging networks, may be included. This simplifies the process for employees and ensures their time with the vehicle is a smooth and stress-free process.
Thanks to the UK’s ever-growing network of rapid-chargers, charging on the go is easier than ever. Many salary sacrifice car schemes, especially those focused around electric vehicles, can unlock access to some of the most convenient electric charging locations.
Benefits of salary sacrifice
Salary sacrifice has numerous benefits for both businesses and its employees. Firstly, a salary sacrifice car scheme costs nothing to set up, making it accessible for businesses of all sizes to offer their employees the opportunity to enjoy a new vehicle at a reduced cost.
Included within the scheme is early termination risk mitigation, safeguarding your business in case an employee leaves, takes maternity leave, experiences long-term illness, or faces other unexpected life events.
Implementing a salary sacrifice scheme can serve as a compelling incentive for attracting and retaining employees. Not only this, but vehicles obtained through the scheme are exempt from National Insurance Contributions, reducing costs for both parties.
Having a salary sacrifice car scheme in place at your business can be used as an effective incentive to attract and retain employees. Not only this, but staff vehicles that are a part of a salary sacrifice car scheme are exempt from National Insurance Contributions. Introducing such a scheme can also contribute towards a fairer working environment, where employees do not feel restricted with only certain individuals benefiting from company cars.
Through the salary sacrifice car scheme, fixed monthly payments are deducted pre-tax (as long as they don't drop employees below the national living wage limit). This leads to reduced National Insurance and income tax payments, resulting in savings ranging from 20% to 40%, depending on the employee's tax bracket.
Additionally, when a business deploys a salary sacrifice scheme and multiple employees participate, the manufacturer may offer discounts on bulk orders. These savings are passed on to each participating employee, effectively reducing their monthly expenses.
Salary sacrifice providers can include additional benefits and coverage to ensure that obtaining and owning your new car is as stress-free as possible. This can include maintenance, insurance, charging access and more, all as part of the same package.
A Salary Sacrifice Car Scheme offers a range of benefits, including:
- New vehicles available at a great price!
- Reduced national insurance and income tax payments (20% to 40% depending on the employees tax bracket)
- Can include maintenance, insurance, charging access and other benefits
- Manufacturer discounts
- Promotes a fairer working environment
- Includes early termination risk mitigation
- Specific electric salary sacrifice schemes available
Salary sacrifice example
Let’s say your company offers a salary sacrifice scheme for the BMW i4 35e, and the lease deal on this is £687.25 a month; this is the amount that is taken out of your gross salary.
If you were a 40% rate taxpayer, you would normally pay £288.64 tax on that £687.25. Thanks to not having to pay income tax or National Insurance as part of a salary sacrifice scheme, you save £262.76 every month. Furthermore, these savings mean that a car that costs £687.25 a month to lease is actually costing you £424.48 – this includes the Benefit in Kind/Company Car Tax for the vehicle.
Contact Dick Lovett today
Working alongside our salary sacrifice partners, Dick Lovett can provide exclusive electric vehicle events so that your business and your employees can explore our electric offerings for yourself. This is a great way to not only test drive the vehicles, but also to learn how to effectively charge them and make the most out of switching to electric.
To find out more about the salary sacrifice car scheme and what options are available to you and your employees, along with the benefits of salary sacrifice, contact our expert Corporate Team today.