Salary Sacrifice schemes for EVs

The Dreamer

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Our company has, after a lot of pressure, finally announced that it will be introducing a salary sacrifice scheme for EVs.

No word yet on whether we’ll be able to purchase, or whether it’ll be lease only, or, of course, what the figures would look like - but it certainly seems that our next car will be a full EV.

The chap I just flew back with from KL had just entered into a 3 year lease on a Model 3 performance, and was singing it‘s praises - aside from the weak 20” wheels - he’s written two off in just the 3 months he's had it, from hitting potholes. (So much so, that he’s bought a set of 18” wheels with winter tyres, and is running those now)!

He seemed to think that a salary sacrifice deal might even put a Model X within reach for someone like me - which I would be very interested in, as I could replace two cars with that! Just need to convince the missus!

Does anyone here have any experience of Salary Sacrifice schemes? Do you get an option to purchase? Or are they lease only?
 
With the incoming 0 BIK this could be a Good option if your company supports it. I’d definitely look at a Tesla lease if my place offered it - although I’m only 18 months into a pcp on my current car so probably not easy/cheap to dump it
 
Yep, the more I think about it, the more this seems like a good idea.

We can let the leasing company worry about depreciation and the like - particularly as more EVs come on line, this may well have a marked effect on residual values.

And being able to pay from gross salary, rather than nett is a huge incentive!
 
Yep, the more I think about it, the more this seems like a good idea.

We can let the leasing company worry about depreciation and the like - particularly as more EVs come on line, this may well have a marked effect on residual values.

And being able to pay from gross salary, rather than nett is a huge incentive!
Tesla Model X or S top of the range it is :)

Or perhaps a Polestar or Porsche?
 
Tesla Model X or S top of the range it is :)

Or perhaps a Polestar or Porsche?

It‘ll be for my wife to run, doing GP visits and the like - most likely a M3 LR, but haven’t discounted the X, as we could replace the XC90 and V60 with that - but my wife has already said she’d like to keep the XC90 as a backup vehicle for the really challenging days.

The M3 LR though, being AWD, will see her through most issues, particularly kitted with cross-climates, or winters.

Up until this announcement, we were looking at buying an i3, (secondhand 120Ah model) - at well less than £30k, they’re not bad value. The hurdle I was facing was my wife’s opinion on the looks, and materials used inside. You can’t fault the beemers build quality, but neither I or my wife are eco-warriors, and we don’t want to look at recycled plastic bottles as part of the interior trim - leather (even faux leather) and wool are fine - but plastic bottles? Ugh! And of course it skips on some luxuries, like electric seat adjust and the like.... at that price point? 🤔

Anyway, the only reservation we have with Tesla, is there is no presence in Newcastle; our closest centres are Leeds or Edinburgh! Which will be a right PITA for servicing! It seems it’s not just Westminster that ignores the North of England! :rolleyes: :D
 
...oh, and if people query my wife’s desire for AWD....

....this is what we’ve just woken up to.....

0B40C3ED-2041-4F24-B89D-75208015443A.jpeg
 
It‘ll be for my wife to run, doing GP visits and the like - most likely a M3 LR, but haven’t discounted the X, as we could replace the XC90 and V60 with that - but my wife has already said she’d like to keep the XC90 as a backup vehicle for the really challenging days.

The M3 LR though, being AWD, will see her through most issues, particularly kitted with cross-climates, or winters.

Up until this announcement, we were looking at buying an i3, (secondhand 120Ah model) - at well less than £30k, they’re not bad value. The hurdle I was facing was my wife’s opinion on the looks, and materials used inside. You can’t fault the beemers build quality, but neither I or my wife are eco-warriors, and we don’t want to look at recycled plastic bottles as part of the interior trim - leather (even faux leather) and wool are fine - but plastic bottles? Ugh! And of course it skips on some luxuries, like electric seat adjust and the like.... at that price point? 🤔

Anyway, the only reservation we have with Tesla, is there is no presence in Newcastle; our closest centres are Leeds or Edinburgh! Which will be a right PITA for servicing! It seems it’s not just Westminster that ignores the North of England! :rolleyes: :D
#firstworldproblems 😂👍

Enjoy the search!
 
A lot will depend on the T&Cs of the scheme. My employer doesn't offer a car scheme like this but they do a salary sacrifice cycle to work scheme which looks fantastic when you first read the marketing blurb - "Get a £1000 bike for only £600"


It is still good but not as shiny as it seems and there are a few gotchas such as

  1. We can only get the bikes from Halfords. This means that our choice is limited and they may not carry the bike you would go for if you had a free choice.
  2. Being limited to Halfords also means that you may actually pay more for the same bike that you could buy elsewhere.
  3. In particular you might not be able to take advantage of buying last years model that only differs by the paint scheme but can be had for £300 less than this years model.
  4. You are limited to £1000 and you can't top up extra yourself. So if the bike you really want is £1200 from Halfords then tough, especially annoying if you can get it for £999 from other bike specialist retailers.
  5. You pay for the bike in full (the advantage is that you do not pay income tax on it, so as a higher rate you will in effect pay £600 for a £1000 bike) over an agreed period of time effectively renting it from your employer. At the end the bike belongs to the employer. The rules of the scheme is that the employer must make it available for you to buy and the government defines a depreciated price which is the maximum they can charge. Many companies just hand it over for a peppercorn (symbolic £1 payment to keep it all legal) but others do charge up to the maximum which if you choose to keep the bike takes a chunk out of what you saved.

Obvious this is a bike scheme, not saying your car scheme is the same, just that it is important to look at the fine print - the savings may not be as great as they first seem.

Another thing to check with any salary sacrifice scheme is to confirm that they retain your full salary figure to use for pay rise, bonus, pension and redundancy calculations - most will, but definitely ask the question if it is not made 100% clear.

Your company obviously has very green credentials at heart - I imagine that they are also encouraging its staff and customers to take their holidays in the UK rather than flying abroad :devil:

Cheers,

Nigel
 
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You make some good points - which are all being discussed on our union forum right now (we have a similar cycle to work scheme).

Your company obviously has very green credentials at heart - I imagine that they are also encouraging its staff and customers to take their holidays in the UK rather than flying abroad :devil:
:D

Our company will do anything - as long as it save them money - absolutely nothing to do with being green - though no doubt they'll wave that flag to the press! Their saving is made in reduced NI costs.

If there was no financial incentive they'd never organise something like this!
 
Our company will do anything - as long as it save them money - absolutely nothing to do with being green - though no doubt they'll wave that flag to the press! Their saving is made in reduced NI costs.

If there was no financial incentive they'd never organise something like this!


Yes, what employers keep very quiet about when promoting these schemes is that the employer doesn’t pay national insurance contributions on all those sacrifices - adds up to a lot of money that they get to keep rather than pass onto the NHS.

Cheers,

Nigel
 
Can we get back on topic please ;)
 
Another thing to check with any salary sacrifice scheme is to confirm that they retain your full salary figure to use for pay rise, bonus, pension and redundancy calculations - most will, but definitely ask the question if it is not made 100% clear.

For anyone to looking at the NHS salary schemes its vital to look at potential pension reductions as a result of the scheme.

NHS pensions are calculated on gross pay but post any salary sacrifice scheme. The reduction in gross pay is before tax/NI, so higher than the £££/month figure advertised.

Yes, what employers keep very quiet about when promoting these schemes is that the employer doesn’t pay national insurance contributions on all those sacrifices

The salary sacrifice schemes are really pushed to staff in the NHS for the reason above and also for reduction in NHS pension costs for the employer which is 14.38% of gross pay post salary sacrifice.

Anyone signing up to any salary sacrifice scheme should go into them with their eyes wide open, no employer is taking part in these schemes to help out their employees, there is always some thing in it for the company first and fore most.
 
What are rough savings for a scheme like this? Our company has only just started a bike one so I’m not holding my breath, but if the savings are big I might give them a poke. Looking at a Tesla model 3 SR+ or long range (no extra options), 40% tax payer.
 
If you won't be using the car for work purposes, you'd still be liable for VAT so savings would be limited to the income tax and NI which for a typical 40% tax payer is 42% total (employee NI is usually 2% at that level).

Easiest way to work out cost is to multiply the payment (including VAT) by 0.58. That gives you your reduction in take home pay.

For example, you see a car for £400/month (including VAT) lease.
You'd salary sacrifice £400 per month (£4800 per year).

Your take home pay would be reduced by £232 per month (£400 x 0.58), or £2784 per year.

This applies to 2020/2021 tax year only.
Next year there would be a 1% benefit in kind cost, followed by 2% the year after.

Using a £35,000 car on a 3 year lease as an example: 1% of a 35k car is £350.
Your tax allowance would be unaffected in 2020/21, then reduced by £350 in 2021/22 and £700 in 2022/23.
This means you'd pay an extra £140 tax (£11.66 per month) in 21/22, followed by £280 (£23.33 per month) in 22/23.

If you're using the car for business purposes, you can avoid some of the VAT (I think 50% if you use the car for personal purposes too).

Obviously there are other savings to consider, the cost of charging rather than filling a tank with petrol makes a big difference, if you're charging at work for free your fuel costs become nil as they aren't taxed as benefit in kind.
 
I've just set up a salary sacrifice scheme for our company, it'll actually go live next week but whether the car is used for work or not is irrelevant, the car is considered a company vehicle regardless, it's the reason BIK is still payable. I'm also not sure how other schemes work but all I've looked into are for a fully maintained lease, i'm sure you could offer to buy it at the end of the lease if you wanted though.

The easiest way to work out what it will save you is to simply take the monthly sacrifice amount (not what it will actually cost you) multiply it by 12, take that from your annual salary and then use an online tax calculator to work out your net wages.

From all the work I've done on our scheme, there's barely any savings on cars with high emissions, sometimes it even works out more expensive than a PCP deal due to the BIK. If you're in the 40% tax bracket it'll definitely work out more expensive.

Salary Sacrifice is all about the EVs, the savings can be quite huge as i know i can take home a standard range model 3 fully insured and maintained, for about £600 a month (cost to me, not sacrifice) with a 16K a year mileage allowance. When you consider the savings in fuel too, that works out cheaper than what my current A class costs me overall each month.
 
Comparing it to bicycles is a bit odd, but you do need to decide whether there is any long term benefit, or whether you are in effect getting a short term benefit which will kick you in the nuts down the line
 
If it is being treated as a company car scheme there are a few things to look out for.

Firstly salary sacrifice schemes work best if you are in the higher rate tax bracket, 40% or 45%.

Normally you would have to watch out for the benefit in kind tax but the good news is that the government have massively subsidised this for EVs, 0% this coming year, then 1% next and 2% the following year. So for a £40k car that is just £500 in tax for a 40% tax payer over the there years.

But check what you are actually paying for the lease. You might be tied to the scheme and have to pay whatever they say which may be higher than lease prices you can get elsewhere.

Also if you want the car at the end of the three years check what they want. It might not be the usual expected low balloon payment you would associate with a lease but a much higher value. As an example, a few years ago when I came to the end of my 3 year company car lease (a Golf diesel) I asked how much to keep it and was really surprised when they came back with a quote of £18,000, much higher than car’s value.

But other than those, looks like it could be a good deal because of the ultra low bik.

Cheers,

Nigel
 
Beware of such salary sacrifice schemes in their ability to adversely affect your contributory pension.
 
Well, having become mildly interested in the benefits of this scheme, we obviously have more on our mind at the moment - and the scheme as a whole has been put on the back burner. A shame really, as it would actually save the company quite a bit of money too - though no point in setting it up for someone you're about to show the door to.

As for pension stuff - not really a factor, I'm about to take mine out of the company (or at least looking at it), and am going to get stiffed for a large six figure sum anyway (though it'll come out of the pot, so not like I have to go begging for a loan from the banks for it).

It does mean that the likelyhood of me getting an electric car has been shelved for the foreseeable future though - still, if I retire, I probably won't need one anyway!
 
I’m looking into this and finding it hard to see any negatives. Our company does not adjust our pension contributions by adjusting based on salary sacrifices or other subtractions, all their contributions are based on your base salary.
as far as I can tell since you’re leasing the car as opposed to buying a bike, there’s no deposit, just the advertised monthly payments taken pre-tax and no fees to pay at the end as you just hand the car back. The scheme I’m looking at includes full maintenance and insurance so seems a no brainier to me, but you obviously need to be of the mentality on not actually owning a car and your just paying a fixed price to effectively rent a fully serviced car.
For me wanting to always have a reliable car in warranty, I don’t mind changing my car every 2, 3 or 4 years, but get it may not be the same for everyone.
Given the discounted deal and being pre-tax I don’t think I could buy / own / run any alternative reasonable car for anywhere near the same price / value. I’m going to seriously look in to it with a view to doing it.
 

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