All your salary sacrifice questions in one place 👀
Salary sacrifice is a great employee benefit, but it can come with a lot of questions. So to help you navigate electric car salary sacrifice, we have compiled a list of questions we get asked a lot!
Is it too good to be true?
No - the UK is committed to getting to Net Zero by 2050, and has committed to all new cars that are sold being 100% electric by 2035. Therefore the government is offering up incentives to help you make the switch, and The Electric Car Scheme is a great way to access these incentives.
Similar to the Cycle to Work scheme (encouraging take up of cycling), The Electric Car Scheme works through salary sacrifice.
So while it’s very good, it’s not too good to be true!
What term and mileage can I have on the lease?
The agreement term must be between 12 and 48 months, and the maximum mileage on the lease is 30,000 miles pa. The term and mileage are flexible to suit your requirements, but you must choose mileage you could cover whilst you have the vehicle, before you place the order.
This allows the lessor to do the financial calculation to take account of the impact of mileage on the second hand value of the car when you return it to them at the end of the term. If you exceed the mileage the lessor will charge you for the additional mileage at a rate quoted to you on entering the lease.
What is the impact of a salary sacrifice scheme on my salary?
A salary sacrifice scheme works on the premise that you contractually agree to a reduced annual salary in return for a benefit - in this case the use of an electric car.
You save income tax and National Insurance by sacrificing your salary, however you do incur a benefit-in-kind (BIK) tax. The amount of BIK tax depends on the value of the car, and the BIK rate – which according to the Autumn Statement will remain at 2% until 2025 when it is due to rise by 1% every year till 2028.
What is benefit-in-kind tax and why do I need to pay it?
As your employer is providing a vehicle for your benefit - HMRC rules dictate that this benefit has a taxable value if you use the vehicle for personal use. The taxable value is established in the Finance Act (i.e. the Budget) each year.
We account for this when we provide the quote for each car with The Electric Car Scheme.
In the Autumn Statement, Jeremy Hunt announced that the benefit in kind tax will stay at 2% until 2025 when it will then increase by 1% every year until 2028.
Who is eligible for the scheme?
This depends a bit on your employer, however, if your employer is signed up, typically everyone can access the scheme subject to the following:
Minimum age 21
Completion of 6 months’ service and outside of probation
Minimum salary of £20,000 after all salary sacrifice reductions
Full driving licence for a minimum of 6 months, with no more than 6 current endorsement points for all drivers of the vehicle
Entry to the scheme is ultimately at the employer’s discretion
Will I need to go through a credit check?
As the car is leased through the company, the company will undergo a credit check, however, there is no personal credit check.
How long must I commit to entering into the salary sacrifice arrangement?
It is expected that your commitment is for the duration of the lease of the car, (1, 2, 3 or 4 years).
However, The Electric Car Scheme offers complete risk protection to support with any unexpected circumstances.
What cars are available to salary sacrifice?
We work with the top leasing providers to ensure that you can get access to any electric car on the market.
If you have a particular electric car in mind, book a call with one of our Specialists or email info@electriccarscheme.com.
Can I choose any accessories and colours?
Yes, you can choose any accessories and specify colours although please note these choices may impact upon lead time as they may require a car to be built in a manufacturer factory.
Your dedicated EV Specialist will go through this with you when discussing your salary sacrifice car.
How many cars can I have under a salary sacrifice scheme?
You can usually take up to 2 cars on the scheme, subject to your employer’s approval, and as long as your salary does not fall below the national living wage after all salary sacrifice deductions.
Is it possible to lease a used or second hand car with salary sacrifice?
Unfortunately, there are currently no used electric car leases as there are very few used electric cars on the road, and the lessors currently do not offer used car leases. If this changes in the future, we will be able to offer these through the scheme, but this is currently not possible.
Is there a lot of admin with a salary sacrifice scheme?
We are on hand to answer questions and requests from employees, HR and Finance teams to reduce hassle and ensure the day to day operations are not impacted by the scheme.
We provide ongoing support in the form of automated payroll reporting, tax reporting and HMRC compliance.
