If you've come this far there is a chance you already know something about salary sacrifice. Are you still on the fence or have questions? We've gone through our frequently asked questions from the website and pulled out the ten most asked to help you understand what the system is all about, who is it for? What are the main benefits to employees and does it benefit the employer.
Ten most frequently asked questions about salary sacrifices from Ready2Lease.
1) What is a Salary Sacrifice Car Scheme?
In a nutshell the scheme is an agreement between employer and employee to exchange (sacrifice) a proportion of the employees salary for a brand new electric or hybrid car lease. The employer is then able to obtain a brand new electric lease without having to pay out the full monthly rental, instead deducting the cost from their gross salary, which in turn reduces their income tax.
2) What can be included in the agreement?
The scheme includes a brand new car of the employees choice, fully comprehensive car insurance, home charger installation, vehicle servicing, maintenance and tyres, roadside assistance, road fund license (road tax/RFL) and recharge rescue service.
3) Is there an eligibility criteria?
- Aged between 18 and 75, with 78 being the cut off for contract expiry if insurance has been included.
- Permanent UK resident
- Full Driving License for the duration of the lease
- Permanent PAYE employee
- Basic pay must not fall below national minimum wage after deductions
4) How complicated is the scheme to initiate?
Naturally there is some paperwork involved, but Ready2lease Salary Sacrifice experts have all the relevant documentation to expedite the process and take away the hassle of creating agreements from scratch.
5) Is salary sacrifice cheaper than leasing privately?
Without doubt it is cheaper than leasing privately. The cost is deducted from your gross salary, meaning your income tax and contributions are reduced, which is where the saving comes from.
6) Can the car still be used for business purposes?
Yes you certainly can, you just need to ensure you insure your vehicle for business mileage, the same as if you had a private lease or ownership.
7) What happens at the end of the contract?
The vehicle is simply returned to the lender who will assess the vehicle and prepare it for re-sale. In some instances the lender may offer a cash sale price for you to buy the vehicle outright, although this is not guaranteed. Note that the business cannot buy the vehicle.
8) How is the BIK Calculated and do I have to pay it when on a salary sacrifice scheme?
Benefit in Kind tax is a compulsory tax charged on the P11D value of the vehicle, fuel type and CO2 emissions, which in the case of electric cars is zero. The BIK rate for electric cars is very low, and will only increase 1% per year until 2028.
9) What happens if an employee takes maternity leave or long term sick?
If an employee takes maternity or paternity leave, deductions cannot be taken from Statutory maternity pay (SMP), however contractual benefits, including the car, must continue during the leave as required by UK employment law. If employees are on long term sick leave, deductions can continue so long as the employee earnings do not fall below national minimum wage.
10) What are the key benefits of using salary sacrifice instead of a personal lease, PCP or other finance agreement?
- Savings on income tax and contributions
- No deposit
- No Credit check against the individual
- Low BIK Rates on electric cars
- Brand new car every 2-3-4 years depending on preference
- One single monthly payment to cover all your motoring expenses.
If your business is interested in implementing a salary sacrifice scheme for employees, please contact us today for a no obligation presentation on the full process, benefits and cost savings, including how the business will save money and retain employees. Please contact us today on Hello@ready2lease.co.uk or 0116 4030235. Visit our Salary Sacrifice Home page