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KEY FACTS

Your employer offers a scheme for you to lease a car, this is referred to as salary sacrifice. The scheme offers new vehicles leased over a 3-year term and includes maintenance, fully comprehensive insurance, UK breakdown cover and road fund licence for an agreed amount of mileage, in exchange for a fixed amount of gross salary per month.

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Salary sacrifice key themes
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Vehicle Choice & Eligibility:

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  • You will need a minimum basic salary of £31,000p.a. (or part-time equivalent).

  • You will be employed on a permanent contract of employment.

  • You will be committing to a 3-year lease and will not be able leave the scheme early without incurring costs.

  • You can choose any vehicle with a co2 output of 75g/km or less as long as the costs for the vehicle do not reduce your basic salary hourly rate below the Employer agreed minimum hourly rate.

  • You are able to take advantage of significant discounts available to the public sector.

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Tax and National Insurance:

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  • You will not pay income tax and national insurance contributions on the amount you sacrifice as you may have done if you received the same amount as salary.

  • The lowest C02 emitting vehicles will attract the biggest tax savings.

  • You will be liable for benefit in kind taxation* dependent on the costs of the vehicle you choose, fuel type, electric range and co2 emissions, however, this amount may be offset in part or in full by the income tax and national insurance savings mentioned above.

  • You are sacrificing for the benefit of the vehicle. The more tax you pay on your salary the greater the saving, making it particularly cost effective for higher and additional rate taxpayers.

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Pension & Benefits:

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  • If you are in the NHS pension scheme you will not contribute to your pension on the sacrificed amount. Costs are taken from your basic salary and pensionable pay and as such will impact the career average salary used to calculate any potential future NHS pension. This would also affect any statutory benefits (e.g. maternity, paternity, adoption leave or redundancy.) Therefore your future pension benefits are affected by salary sacrifice.


 

*Benefit in kind is a calculation which gives an assumed valued to you receiving the benefit from your employer of your chosen lease car based on set government rates. This value is treated as if it were income and attracts income tax at the rate relevant to your overall taxable income.

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