Salary sacrifice is a popular scheme for both employers and employees to save money. Employers can save on National Insurance (NI) contributions, while employees can benefit from a wide range of perks like full maintenance, servicing, tyres, and breakdown recovery, which are often included in the salary sacrifice package.
The vehicle of choice for this scheme is usually an electric car, as they have low benefit-in-kind rates that can result in significant savings for both parties. With the generous government benefit-in kind net zero subsidies - currently just 2% on net zero electric vehicles - salary sacrifice becomes an even more attractive option for those looking to make a clean electric vehicle transition.
Salary sacrifice schemes can offer great benefits and savings to both employers and employees.
One of the main benefits is the reduction of employee National Insurance (NI) payments, which will be 2% less at 10% from January 2024 on earnings between £12,570 and £50,270. These NI savings apply to every employee member of the salary sacrifice scheme.
Vehicles of choice for salary sacrifice are usually electric cars due to low benefit in-kind rates of just 2% on net zero vehicles; this makes electric cars an excellent choice for employees. Employers operate a cleaner, greener fleet, lower their carbon footprint and by offering this scheme, it has an impact on positive recruiting and staff retention.
Salary sacrifice is becoming an increasingly popular way for employees to save money on a new electric car. It's a simple process whereby the employer leases an electric car to the employee, who then pays less tax and National Insurance contributions (NICs) due to the reduced salary.
The employer also benefits from paying less NICs. The lease cost is deducted from the employee's salary at source, hence the term "salary sacrifice".
Salary sacrifice schemes have been around since the 1970's, offering a win-win solution for both employers and employees to save on cost and taxes. Over time, salary sacrifice has evolved into a useful tool for employees to benefit from pension plans, child care costs and most recently, electric cars.
The net zero electric car scheme is becoming increasingly popular due to the National Insurance contribution and tax savings it offers. With benefit-in-kind subsidies at just 2%, this has made it more affordable for employees to switch to cleaner electric vehicles, which for many is a new car bonus. For employers, this encourages positive staff recruitment and also retention.
All Vehicle Contracts | Proud to be working with Employers across the UK to introduce cleaner, more cost-effective motoring solutions for their Employees
Employee Frequently Asked Questions
Q. Why am I not better off just sticking to what I know best, which is a petrol or diesel vehicle? A. With the Government planning to ban all sales of new petrol and diesel vehicles in the future, switching to an EV now makes perfect sense. Many expect that when electric cars become the new ‘norm’, a lot of tax benefits that are currently available are likely to be less, meaning now is an optimum time to switch.
A salary sacrifice car scheme is a non-cash benefit option for employees that can be a great alternative to a traditional company car or company car allowance. However, it is important to note that the employer must change the terms of the employee's employment contract to include the details of the benefit, which employees must agree to.
Employers cannot reduce the employee's earnings below the National Minimum Wage. There are procedures in place to ensure that the salary sacrifice deduction never falls below the national minimum wage, which is £11.44 per hour from 2024. It is also important to make provisions for employee lifestyle changes that could affect the affordability of the car non-cash benefit.
Salary sacrifice is a fantastic option for companies looking to offer their employees a brand new electric vehicle that can also be fully insured and maintained. This scheme allows employers to lease electric cars to their employees, with the costs deducted from the employees' salary as a non-cash benefit. This is a tax-efficient way of offering an incentive to employees, as it can result in additional Tax and (NICs) savings.