A salary sacrifice arrangement must not reduce an employee’s cash earnings below the National Minimum Wage (NMW) rates. The P11D deadline for the salary sacrifice scheme is almost upon us for 2018/19. For everything else please contact us via Webchat or Telephone. As we said earlier, we are a Social Enterprise. Your employer cannot charge you more than it costs them to rent from the leaser. If your employer offers any extra childcare vouchers, then you will pay tax on them. There will be some protection for staff joining these schemes before the April deadline (see below). You can find out more about the legislation in our Funding and Tax Guide, produced in association with Deloitte. What is a salary sacrifice scheme? A salary sacrifice scheme is a contractual arrangement whereby an employee surrenders part of their cash remuneration in return for a non-cash benefit, such as a company car. How salary sacrifice works. Do you have to pay tax on your redundancy pay? Take a test drive in an Audi e-tron. Our salary sacrifice schemes can improve your employees’ ability to afford both everyday essentials and luxuries by contributing directly from their payslips. It can also be referred to as ‘salary exchange’ and one of its most common uses is increasing pension contributions. Salary sacrifice’ podcast, Matthew Walters, LeasePlan’s Head of Consultancy and Customer Data Services, says: “With a 0% company car tax tariff […] those vehicles, through salary sacrifice, become phenomenally cost-effective and very, very cheap”. GeorgiaC. At the end of the contract, you can exchange the electric car for a new one, buy it, or simply hand it back*. If the organisation you work for offers a salary sacrifice scheme, then you’ll be eligible to opt in depending on the terms set out by your employer. Electric cars’ list prices are generally quite a bit higher than their petrol or diesel counterparts – but then running costs and 0-2% BIK swing monthly fees back in electric’s favour. When it comes to electric vehicle salary sacrifice as an employee there are just three things you need to pay for. From September 2017, working parents of three and four-year-olds will be able to get 30 hours’ free childcare a week, worth around £5,000 a year per child. More details can be found in our It’s the same as other salary sacrifice schemes, such as childcare, cycle to work schemes or pension contributions. Many organisations now offer salary sacrifice schemes. Not all employers offer salary sacrifice, so check with your employer or visit your scheme website. Please note: As there are so many salary sacrifice schemes and different terms and conditions, we advise you check with your employer’s benefits or human resources team (or dedicated intranet websites, if available) whether there are any additional benefits and risks associated with belonging to these schemes. Sorry, web chat is only available on Once the car has been paid for, your salary must remain at or above the national minimum wage – it cannot be based on household income. This has been updated for the current tax year of 2020/21. Add +44 7701 342744 to your Whatsapp and send us a message. 10 REPLIES 10. cookies policy. Examples of salary sacrifice schemes and employee benefits. This is the cost of the car. Lower earnings might also affect your State Pension or contribution-based state benefits. Employers must make sure that participation in a salary sacrifice scheme should not reduce an employee’s cash earnings (hourly rate) to below the National Minimum Wage. Salary Sacrifice GMP Drivercare are at the forefront of offering a complete peace of mind package that allows your employees to get the best possible prices, on the best vehicles available in the market achieved through close links with the leading manufacturers. In this arrangement a company leases the car on behalf of the employee. The idea behind this is quite simple. An electric vehicle salary sacrifice scheme lets an employee pay for an electric car each month using their gross salary – that’s before tax and other contributions are deducted. Salary sacrificing is sometimes called salary packaging or total remuneration packaging. You would be £78 better off because of the tax and National Insurance you’ve saved. Claiming your tax rebate after losing your job, Out of work checklist – things to do if you lose your job, Review your budget after a drop in income, What to do about debt if you lose your job, Your pension options if you’re made redundant, Top tips for making money when faced with job loss. For example, this might include a reduction in a work-based pensions contribution, or Trade Union contributions, where these are based upon a percentage of your gross earnings. £110 a month (if you have joined the scheme on or after 6 April 2011). An electric vehicle salary sacrifice scheme lets an employee pay for an electric car each month using their gross salary – that’s before tax and other contributions are deducted. It’s worth checking – some employers do provide life cover at your original salary so you don’t lose out. LeasePlan’s SalaryPlan salary sacrifice scheme, ‘Thinking of EV? BIK is the value of the benefit you receive – in this case, a car. Need help sorting out your debts, have credit questions or want pensions guidance? A salary sacrifice arrangement is an agreement to reduce an employee’s entitlement to cash pay, usually in return for a non-cash benefit. You will continue to receive National Insurance savings and should still retain existing savings enjoyed from being a member of a Salary Sacrifice. Road fund licence, manufacturer servicing, breakdown cover, fully comprehensive insurance and one vehicle charge point are included for the duration of the term. What are the benefits of electric car salary sacrifice? A lower salary, as a result of salary sacrifice, means any life cover through a scheme at work could be less. Consumer hire agreement, authorisation and exemption 11 Overview 11 6. With salary sacrifice schemes, you can take advantage of potential National Insurance savings as well as helping your employees achieve income tax … Accepting childcare vouchers from your employer might affect your tax credits. You won’t actually own the car – this is the same as if you already lease your car, pay for it on finance, or have a company car. Got a question? Employees enrolled in a car, accommodation or school fee salary sacrifice agreement, before 6 April 2017, will be protected until the end date of their agreement, or until 5 April 2021, whichever is sooner. As a cycle to work salary sacrifice scheme, you could save up to 47% on the price of a bike. In addition, your employer will not have to pay their Employers’ National Insurance contributions on the part you sacrifice. In an ideal world. The government tops up your account with a 20% contribution (the same as the basic rate of tax), up to a maximum contribution of £2,000 a year per child. The cost of the rental is deducted from your gross pay. Essentially, the same as what you’d pay anyway, but with a new, clean car for a cheaper cost. Our salary sacrifice scheme allows your employees to slightly reduce their gross salary in return for the use of a non-cash benefit. The government has announced that the tax PAYE (income tax) advantages of some employee benefit arrangements offered through salary sacrifice schemes will end for anyone newly joining a scheme in April 2017. Salary sacrifice enables you to exchange part of your salary for a non-cash benefit from your employer, such as increased pension contributions. Salary sacrifice is commonly used to boost your pension, but you can also give up salary in return … With insurance, breakdown cover and maintenance often included in the salary sacrifice schemes, the savings could be even greater throughout the lease of a new vehicle. Taking control of debt, free debt advice, improving your credit score and low-cost borrowing, Renting, buying a home and choosing the right mortgage, Running a bank account, planning your finances, cutting costs, saving money and getting started with investing, Understanding your employment rights, dealing with redundancy, benefit entitlements and Universal Credit, Planning your retirement, automatic enrolment, types of pension and retirement income, Having a baby, divorce and separation, what to do when someone’s died, choosing and paying for care services, Buying, running and selling a car, buying holiday money and sending money abroad, Protecting your home and family with the right insurance policies, Coronavirus Money Guidance Range was once a common concern with electric cars, but many now boast 250 miles or more per charge. £124 a month (if you have joined the scheme on or after 6 April 2011). A salary sacrifice scheme is an arrangement between you and your employer, where you give up or ‘sacrifice’ a portion of your salary in exchange for other, non-cash benefits. Salary sacrifice schemes only work for you and your employer if the benefits involved are tax-free. The Charter School in North Dulwich has its own employee benefits scheme. Frequently Asked Questions 16 You open an online account through GOV.UK and pay into it to cover your childcare costs. If you joined before then, you can have up to £243 a month. The benefits offered as part of this scheme within this organisation are pension contributions. But with the childcare vouchers, you would now have £1,406 + £243 = £1,649 in total. The existing Childcare scheme will run until the new scheme, Tax-Free Childcare, is launched in early 2017. Which is why they’re encouraging businesses and their employees to switch to an EV by offering a tax-efficient way to pay for your lease – AKA Salary Sacrifice. 3 pages) Ask a question Practical Law may have moderated questions and answers before publication. It is important to note the rules around salary sacrifice schemes for low paid workers. It’s going to be available to families of under 12s where both parents are working (and working single parents) who are not already claiming tax credits. In the ‘Thinking of EV? internet browsers with JavaScript. - Get free trusted guidance and links to direct support, Clear English Award - Opens in a new window, Money manager for Universal Credit claimants, Workplace pensions contribution calculator, Things to consider before taking a salary sacrifice, Changes to employee benefits from April 2017, How your employer can help with childcare costs, Defined benefit pension schemes explained, How much Income Tax and National Insurance you should pay, We can’t separate money worries from our mental health, Benefits and tax credits when you’ve lost your job, Pay and benefits for temps and agency workers, Changing your career following redundancy, Employment contracts and your employee rights explained, How Income Tax, National Insurance and the Personal Allowance works, Scottish Income Tax and National Insurance, Coronavirus – what it means for you and what you’re entitled to, Employed and furloughed: The coronavirus job retention scheme, Employed, off sick or self-isolating: claiming Statutory Sick Pay, Tax and National Insurance when you're self-employed, How to fill in a Self Assessment tax return.