Salary sacrifice schemes are a fast growing sector in the fleet market. They have been accelerated by the low benefit in kind tax on electric cars and, to a lesser extent, plug-in hybrid vehicles.
To give you an idea of the current popularity of salary sacrifice schemes, one leading premium car manufacturer told CBVC that of its fleet orders, 80% were for electric or hybrid vehicles. Of these orders, 20% were for salary sacrifice schemes.
So how does it work?
It’s fairly simple really. As an employee, you give up some of your gross salary for a fixed budget, fully provisioned company car. At the same time you save on income tax, National Insurance and the National Insurance levy thanks to taking a lower taxable income.
As an employer you are de-risking your fleet operations – such as the use of personal cars on business (called the ‘grey fleet’) – while also offering a highly important retention tool and demonstrating commitment to the green agenda as part of an Environmental, Social and Governance (ESG) programme.
Salary sacrifice is often shortened to just salsac.
Is there company car tax to pay?
Yes there is company car tax to pay on a salary sacrifice car. But the reason such schemes have become so popular is because of the benign benefit in kind taxation of electric cars. Currently this is at 2% which is held until the end of financial year 2024/25.
While we do not know the Government’s intentions beyond that period, industry experts suspect it is unlikely to rise beyond 5%, since the Government wants to encourage the switch to zero emission ahead of its 2030 cut off point for the sale of new petrol and diesel vehicles.
Should I switch my company car fleet to salary sacrifice?
The short answer is no. A salary sacrifice car is simply a company car but provisioned in a different manner. The key aspect is the very low company car taxation paid on electric cars. If your fleet is not going electric, now is the time to do so in order to really benefit from the employee and employer cost savings of electric cars, as well as improving local air quality thanks to zero tailpipe emissions.
If you want help in taking your fleet electric, please give us a call on 01283 351200 or email: sales@cbvc.co.uk.
