Six secrets of salary sacrifice

Six secrets of salary sacrifice

Posted by

Charlie Strand

May 2024

Here’s our insider guide to the secrets of salary sacrifice – one of the great employee benefits. But not everyone knows about it.

Salary sacrifice is where you give up some of your salary for a brand new electric car. Think of it as the  Cycle to Work scheme but on an epic scale.

So here’s our insider guide to the six secrets of salary sacrifice.

First – it’s the best-kept secret in employee benefits

If you look through any list of the most popular  employee benefits to offer staff, a typical top 10 goes something like this:

  1. Provision of health insurance
  2. Flexible working hours
  3. Pension matching
  4. Life insurance
  5. Mental health and wellbeing support
  6. Free cinema tickets
  7. Flexible holiday allowance
  8. Parenting support
  9. Gym membership
  10. Benefits and perks – such as a positive working environment; a wellbeing strategy; and professional development

So, where is salary sacrifice on this list?

Quite. Nowhere to be seen. It’s a secret. But it really shouldn’t be. Because you get to drive a brand-new electric car at a cost lower than you could manage privately.

Like other employee benefits, you sacrifice some of your gross salary (that’s the amount before income tax and National Insurance is deducted) to lease a brand-new car through your employer. In turn, this lowers your gross salary, which means you pay less income tax and National Insurance. (Although you will need to pay benefit-in-kind tax but this is negligible, starting from as little as £5 per month.)

In turn, your employer provides you with the car of your choice.

Second – it’s a company car in all but name

Have you ever looked at your colleagues who drive around in fully funded company cars and thought, “Wow”, it would be great to have one of those with none of the worries over running costs or repairs?

Well, you can.

The secret behind a salary sacrifice-provided car is that, for all intents and purposes, it’s like a company car. OK, you’ve paid for it from gross salary, but all the running costs – such as insurance, servicing, repairs and new tyres (all of which are going up in price, particularly insurance) – are taken care of.

Your only running cost after your salary sacrifice is the electricity you put in the car.

Third – there’s no deposit

Have you sometimes scanned those attractive PCP offers from dealers and then been disappointed by the amount of deposit that is required?

It’s the same with personal leasing: you often have to find nine months of rentals in advance before you can cash in on the attractive monthly rental rate.

So here’s another secret about salary sacrifice: you pay no deposit. No scratching around for big chunks of money to find for a downpayment. Nothing to pay upfront.

That’s right. Zero. How good is that?

Fourth – where did your running costs go?

The average car costs nearly £250 a month to run, according to The Car Expert. It’s an astonishing amount that includes everything from fuel and insurance to maintenance and breakdown cover.

Bin all that.

With a Fleet Alliance electric car salary sacrifice scheme, everything is included in your monthly rental payment—with the exception of electricity.

So no insurance to pay – the Association of British Insurers says that motor insurance premiums were 25% more expensive last year than they were in 2022, and the average insurance cost is now £627.

And no replacement tyres to pay for when you hit one of the growing number of potholes or get a puncture. Just as well, as the average cost of a premium tyre has risen to £200.

It’s worry-free motoring – that’s another secret of salary sacrifice.

Fifth – spend your credit how you want

The fifth secret of salary sacrifice is that you keep your credit line.

What does that mean? Well, if you take out a loan the amount you borrow eats into the available headroom of your credit allowance.

So paying for a car on a PCP or a personal lease will reduce the amount you can borrow for other things that you might want in your life.

However, securing a car through salary sacrifice has no impact on your credit line because your employer is the one who is paying. So, you get to keep your credit score fully  in the black.

Sixth – choose the car you want

Here’s the final secret: choosing a Fleet Alliance salary sacrifice car means you get to choose the car you want through a special driver portal.

You’ll be able to browse hundreds of cars to research, compare and select the car of your choice – from city runabout to family SUV – and understand how the amount you pay will affect your monthly income.

It’s really that simple.

So make sure salary sacrifice doesn’t remain a secret – ask your employer to add it to your company’s benefits scheme. And get everyone to share in the secret that is salary sacrifice.

 


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