A great incentive for an employer to offer, salary sacrifice is a tax-efficient way to provide non-cash benefits to employees.
These can range from pension contributions to childcare vouchers to bicycles or even an electric car lease.
How does salary sacrifice for cars work?
Like the cycle-to-work scheme, a salary sacrifice car scheme is becoming an increasingly attractive way to get a brand-new company car. Due to its advantages for both employer and employee, business car leasing has never been so easy.
Employees can sacrifice a fixed amount of their gross salary and in return, they can lease a brand new environmentally friendly car. The popular scheme works particularly best for ultra-low emission or zero-emission cars as your savings will be maximised.
Three salary sacrifice benefits for employees
Savings on income tax and National Insurance
1. A salary sacrifice comes with impressive tax benefits.
The higher your salary, the more income tax you pay. By exchanging part of your salary for an electric car, the amount of tax you pay each month will be reduced.
You’ll also save money on National Insurance Contributions (NICs). NICs are something you pay when you get your wages. The amount you pay depends on how much you earn in a particular period. Therefore, any non-cash benefit given to an employee is exempt from the NICs payment.
2. No deposit or credit check required
An initial down payment is usually required for a finance car, so this is a cost-saving benefit of a salary sacrifice car.
A credit check is not required either, so you wouldn’t need to worry about not being accepted for finance and it would save you a bit of time too.
3. All-inclusive monthly fee
Your monthly fee typically includes car insurance, maintenance, road tax and breakdown cover.
This is a significant benefit because if you chose to lease your car through a standard personal contract hire package, you would need to pay extra for all the above services.
Three salary sacrifice benefits for employers
1. Retention, reward, and motivation
A salary sacrifice scheme is an attractive benefit for new employees looking to join the business, but it’s also an excellent retention tool for existing staff.
The scheme acts as a reward and should motivate your employees, increasing staff productivity.
The scheme encourages low-emission vehicles meaning you can improve your business’s carbon footprint and corporate social responsibility credentials.
3. National Insurance savings
When your employees make use of a salary sacrifice scheme, you’ll make National Insurance savings. This means you can pass this saving on to your employees’ pensions or retain it for yourself and reduce your business costs.
Carparison’s best car lease deals can suit your every need. Contact their leasing specialists at www.carparisonleasing.co.uk for more information.