How Salary Sacrifice Works

Let’s explore the concept of salary sacrifice for electric vehicles. While giving up part of your salary for an electric car might not initially seem appealing, opting for an electric vehicle can offer cost savings compared to a traditional company car scheme or car allowance.

In this arrangement, the employer acts as the lender, providing benefits as specified in the employee's contract. This system relieves employees from the hassle of financing their vehicles or managing personal agreements, allowing them to maintain their credit lines for other purchases. Employers may explore various funding options, but comprehensive maintenance and employee insurance contracts are typically favoured.

Employees benefit from lower National Insurance contributions thanks to a reduced take-home salary and the lowest benefit-in-kind taxation, which is currently set at 3% and expected to rise to 5% in 2008. The most significant savings for employees arise when salary sacrifice lowers their income below the £50,270 threshold, decreasing their tax rate from 40% to 25%. Employers also reap the rewards of decreased National Insurance contributions, making salary sacrifices particularly appealing, especially given the current high levels of employer National Insurance contributions.

Setting up a salary sacrifice scheme is relatively straightforward; however, real savings can be achieved by designing an effective employee scheme that provides substantial salary sacrifice benefits for both employees and employers, which is where AVC specializes. Our team is eager and prepared to create a customized salary sacrifice presentation to meet your needs.

Please remember that the information in this video is for informational purposes only and may vary based on individual tax circumstances. For tailored salary sacrifice presentations that suit your vehicle requirements, please get in touch with our salary sacrifice team.