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Salary Sacrifice
What is Salary Sacrifice?
It’s a scheme that enables your employees to ‘sacrifice’ some of their salary in return for a brand-new company leased car. Because the sacrifice is a deduction from an employee’s gross salary, cost savings are made on income tax and National Insurance, making the cost of leasing a car cheaper than leasing the same vehicle on a Personal Contract Hire agreement. Benefits are increased significantly for both parties if the vehicle leased is electric.
Benefits for your business
Savings for your company
Savings are made via lower National Insurance contributions and reclaiming VAT on the rental - 50% of VAT payable on lease element of rental & 100% of VAT payable on service element of rental can be reclaimed.*
No cost to your business
There are no set-up fees and the scheme is cost neutral to your business. All employee savings are retained by the employee.
We manage the whole process
From initial set up including credit application and finance agreement, vehicle quotation and order, employee contribution calculations, vehicle delivery and employee in-life support.
Suitable for all employees
Regardless of their status or need for a company car within the business, so long as the individual’s salary is at least the national minimum wage after any deductions.
Tailored for your business
The scheme can be tailored to your company’s requirements, for example limiting employee choice to only low or zero emission vehicles, size or type of vehicle or contract length.
Electric vehicles
When electric vehicles are chosen it will assist your green agenda and help to deliver on your Environmental, Social, and Governance (ESG) and CorporateSocial Responsibility (CSR).
Grey fleet reduction
The scheme assists with duty of care and health & safety inthe management of grey fleets (employees using their own vehicles for business purposes).
Vehicles are transferrable
If an employee leaves the company, their lease vehicle can be transferred to the employees new employer or to another employee in your company, subject to eligibility critera.*
Salary Sacrifice Example
MG 4 Hatchback 125kW SE EV 51kWh 5dr Auto
20% Tax Payer
| Gross Monthly Salary Sacrifice | £433.68 per month |
| Employee Income Tax Saving | £86.74 per month |
| Employee National Insurance Saving | £52.04 per month |
| Benefit in Kind Payable by Employee | £9.16 per month |
| Estimated Net Salary Reduction | £304.06 per month |
40% Tax Payer
| Gross Monthly Salary Sacrifice | £433.68 per month |
| Employee Income Tax Saving | £173.47 per month |
| Employee National Insurance Saving | £8.67 per month |
| Benefit in Kind Payable by Employee | £18.32 per month |
| Estimated Net Salary Reduction | £269.86 per month |
The indicative figures shown above are based on the following parameters:
Contract Length - 36 months
Annual Mileage - 10,000
Leasing Company Maintained (routine servicing, tyres, MOT's and breakdowns)
The examples above should only be used as a guide, bespoke prices can be provided upon request.
Benefits for your staff
One set monthly salary deduction, includes:
- Significant savings compared to retail alternatives
- Vehicle servicing and maintenance
- Tyre replacement due to wear & tear
- Roadside assistance in the event of a breakdown
- Road fund licence
Tax & NI savings
Because payment is taken from the employee’s gross salary via payroll, they benefit from Tax and National Insurance savings (typically 30- 40% savings for an electric vehicle) making the rental substantially less than a Personal Contract Hire (PCH) agreement.
No company car tax
The vehicle is classed as a benefit rather than as a “company car” by HMRC, therefore only Benefit in Kind (BIK) is payable by the employee rather than the vehicle being subject to company car tax rules. BIK rates on an electric car for 2021/22 are 1%, rising to 2% in 2022/23 & held at this rate for a further two years.
How do your employees order their vehicle?
1.
The employee selects their vehicle, obtains quote(s) and their salary deductions are calculated.
2.
The company and the employee provide confirmation of the order and the employee signs the addendum to their employment contract.
3.
The vehicle is ordered through a manufacturer authorised dealership and estimated delivery date provided to employee.
4.
You sign the vehicle lease agreement and direct debit for lease payments.
5.
The vehicle is delivered and salary deductions commence.
6.
The employee is provided with contact details to assist with any queries such as parking permits, foreign travel and vehicle maintenance.
Get in touch
If you'd like more information on Salary Sacrifice, please contact the Key2Lease team on 01522 440440 or sales@key2lease.co.uk.