What your Employees Need to Know About Salary Sacrifice

1. What is Salary Sacrifice?

A salary sacrifice scheme allows your employees to exchange part of their pre-tax salary for a brand-new car!

This ‘sacrifice’ is met by employees changing their terms and conditions of employment concerning pay. It is worth noting that Salary Sacrifice relates to employment law, not tax law. This is because when your employees apply for a Salary Sacrifice in return for a non-cash benefit, they give up their contractual right to the cash remuneration until the vehicle is returned.

2. What does Salary Sacrifice mean for my employees?

The scheme that we offer allows your employees to sacrifice a small portion of their salary in return for a new zero or low-emission vehicle that is of your employees choosing.

3. What is Benefit in Kind (BIK)?

HMRC determine that organisations can make ‘in kind’ payments to employees which are not taxed at the source but are taken as payment for tax purposes. This attracts a certain percentage of tax which is determined by the P11D price of the vehicle. This tax charge is based on the low CO2 emissions of the vehicles that are included across the scheme which makes them more desirable compared to higher-emission cars.

4. Does it just include the vehicle or are there other things included?

The Salary Sacrifice scheme is an all-inclusive package that covers finance, maintenance, tyre maintenance, UK roadside assistance, annual road fund license, and fully comprehensive insurance, including additional drivers. The maintenance covers service requirements, batteries, and exhausts under normal wear and tear conditions, with a few exclusions like glass and driver damage.

6. Which vehicles attract the best savings?

Vehicles with a CO2 rating of less than 50g/km attract the best savings due to current Benefit in Kind (BIK) legislation. Additionally, certain manufacturer incentives are available for these vehicles.

7. Do employees need to report their vehicles to the HMRC for tax purposes?

If your employee has a new vehicle, it's their responsibility to report it to HMRC for tax purposes. When contacting HMRC, they will need to provide their company's PAYE reference number, their national insurance number, vehicle details, P11D (list price), CO2 emissions, date registered, and engine CC. A reminder email and supporting information will be sent by the Customer Experience team the day after the vehicle is delivered.