Does anybody have any experience with an Electric Vehicle Salary Sacrifice scheme here in the UK?

 

The company where my wife works is planning to launch such a scheme soon.  It sounds almost too good to be true.  Basically, the employer leases an Electric Vehicle from one of the big car leasing companies, and the employee "rents" the car from the employer.  The employer then deducts the cost of this lease from the employee's gross (ie. pre-tax) salary, and the employee has to pay the BIK (Benefit In Kind) on this benefit.  But since the BIK rate on electric vehicles is only 1% currently (2% next year), compared to 20+ percent on petrol or diesel cars, it's still a big benefit for the employee.  See the following LeasePlan website for more details:  Salary Sacrifice | LeasePlan

 

For anybody fortunate enough to be a higher rate tax payer, the employee is essentially saving about 40% on the cost of the lease (or 20% for a basic rate tax payer).  The lease typically includes things like servicing, insurance etc.

 

From everything which I've read, this seems to be totally legal and approved by HMRC as a way to get more people switched over from ICE cars to electric vehicles ; not some kind of tax dodge.

 

As it seems almost too good to be true, maybe it is too good to be true, and I'm missing something?!

 

I know that plenty of people will say that they won't ever lease a vehicle, because you're paying money for something that you will never actually own.  But personally, I'm OK with both leasing and owning ; and if I can save a big chunk of money on an electric car, I would be very happy to lease it.  I really like the look of the Skoda Enyaq, as a spacious family car.

 

It does seem rather unfair to me that the people who stand to gain most (40%) from this scheme are those people who are already earning a good salary, whereas basic rate tax payers gain only 20%.  But I guess that's a whole other discussion.....

 

 

Hi Mark, provided it is cleared with HMRC as legal, I'd say go for it - generous deals like this from the Govt. tend to be not around for very long. Is there an option for owning the vehicle at the end of the lease period? 

I had a long look at these schemes when my company was planning to announce one. They are definitely HMRC approved, and for the most part should save you money compared to a standard lease without the tax benefit. There are a couple of things I would note though to check. Firstly, these schemes are usually agreed with a single lease provider, so it is likely that the gross monthly rate before your tax benefit could well be more than you could fine a comparable deal on the same car through a leasing broker. As a result, your actual savings will not usually be the full theoretical amount of your tax savings. I even saw some examples (including on an Enyaq) where even after tax, the monthly costs was still more than a lease sourced through a broker without any tax benefit. So do a price comparison as well as just looking at the monthly tax savings.

 

The other thing to look at is what happens if you leave the company, at either yours or the company's choice. Some of these schemes will then default the lease back to yourself individually, so you are stuck paying the balance of the lease but without the tax benefit. That was the arrangement that my company were offering so I stayed well clear as the gross lease rates were so uncompetitive.

 

On the other hand, I do know some people that are paying very low monthly rates after tax to the point that over a period of three years, they are paying out less for a lease car than they would have lost in depreciation had they bought one outright.

Hi, my company run a salary sacrifice scheme and it has been hugely popular over the years. I've used it for the first time to get an Enyaq, delivery at the end of this month hopefully.

The positives, and this is for the scheme my company offer; no hefty deposit up front, insurance for 2 people, servicing, breakdown insurance and even tyre replacement. Coupled with the fact that we can also charge for free at work in the staff car park and it makes it a no-brainer.

As said above, there are penalties if you leave the company before the lease is up, so read the small print first. 

The big risk is that as the Government are skint (because they have spent so much on Covid) that they significantly raise taxes, might be 2% BIK this year, but next year could be much higher.

 

I simply don’t think they can afford to give these huge tax breaks going forward, they might even exclude cars from salary sacrifice.  Someone in the Treasury is bound to spot that a 40% taxpayer is only paying 2% so they are losing 38% and therefore is a high risk loophole will be closed one day.

 

But you are correct, currently an almost too good to be true deal under this years tax rules.  But if you go ahead, just have a contingency plan in case you have to pay all the tax and the lease payments at a subsequent date.

 

 

Edited 4 July, 20214 yr by SurreyJohn

Thanks to everybody for their responses so far.

 

I haven't yet received complete details of the new scheme at my wife's company.  Here's what we have been told so far:

• Lease company is LeasePlan
• No deposit, just monthly upfront payment via the payroll
• Fully comprehensive insurance
• Maintenance
• Roadside assistance
• Extended end of contract damage waiver of £500 included
• Early termination cover included for life events eg. maternity, internal job change
• Optional EV charger can be ordered and installed

My understanding is that HMRC have already confirmed that the BIK rate for Electric Vehicles will increase from 1% to 2% in the 2023-2024 tax year.  So if I take out a 3-year lease, we should hopefully be OK until at least the end of the lease, so I can't really ask for any more than that.  I agree with SurreyJohn above that this kind of benefit surely cannot be maintained at these levels in the long term, once there are huge numbers of people driving EV's.  But even 3 years of such benefit sounds fantastic to me!