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An easy guide to Electric Car Salary Sacrifice (2022/23)
Salary sacrifice for cars, often shortened to just salsac. It’s a way of giving up some of your salary for a new electric car without it costing you very much, thanks to some taxation advantages.
Sounds complicated. It’s not – honestly! Here’s an easy guide to electric car salary sacrifice.
You choose the car that you want from a list provided by your employer. The car will come with everything you need – road tax, maintenance and so on. All you have to do is insure the car and (in most cases) provide some electricity when the battery is running low.
You pay for the car monthly. It comes out of your gross monthly salary – the gross is the amount before any income tax or national insurance is deducted. Which is the clever bit because you save lots of tax and National Insurance on the salary you sacrifice for the car- hurrah!
A small one. The car is seen as a benefit by the tax man, so Mr HMRC will want you to pay a little bit of tax on the car.
Hear us out. Because this is the cool bit. If you choose an electric vehicle (and why would you not do so?) the benefit in kind taxation is incredibly low. We mean, really low.
Go on then, how low is the tax?
Good, we hoped you’d ask. Let’s take two examples, based on the 2022/23 tax year starting 06 April.
The first is the MINI Cooper SE. To drive this brilliant runabout will cost you just £10 a month (20% taxpayer) or £20 a month if you’re in the higher earner bracket. (We told you it was low.)
The second is the Audi e-tron Sportback. To drive this swish executive SUV will cost you just £22 a month (20% taxpayer) or £44 a month if you’re in the higher earner bracket.
That tax is taken from your net salary – that’s gross salary minus the cost of the car – so you pay a reduced amount of tax overall.
No, that can’t be real!
Sorry to rebuff you, but yes! It is. And that’s why salary sacrifice is such a good idea.
Why don’t we take that MINI Cooper SE as an example based on a 40% taxpayer. This is how the costs break down:
- Monthly gross cost of the car is £424
- The net amount you pay after tax and NIC reductions (but plus the benefit in kind) is £263
So you are sacrificing £263 net to drive a car that is fully maintained and looked after – all you need to do is add on insurance and the electricity.
Now, here’s the context bit: if you were to lease the car personally from your monthly take-home pay it would cost you £466 a month.
So salary sacrifice is saving you over £200 per month for the very same car.
That’s a good result, wouldn’t you say?
If you would like to learn more head over to our salary sacrifice car scheme page, where you can arrange to speak with one of our scheme experts.
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