Yes, you heard me right …You’ve seen the EV car of your dreams and you want to get it a bit cheaper. Well, now you can with the taxman’s help! ‘What?’ I hear you say. No, the price doesn’t alter, it’s how you organise it that makes a difference …
If you are a director or an employee and you can choose your company car, or your company will agree to use a Salary Exchange scheme, then a green and tax-efficient vehicle, ie an EV car, combined with a Salary Exchange/Salary Sacrifice scheme could be your answer.
“Salary Sacrifice is a well-known, tried and tested way of swapping some of your salary in exchange for your employer paying for something.”
It doesn’t generally work with cars because of the impact of company car taxation, however, the great thing about an EV car is that it has a 2% rate of benefit-in-kind taxation. That is to say the individual will be taxed on 2% of the value of the car instead of the salary they have swapped.
Here is an example for the financial year 2012/13 (and how it relates to an EV car)
A base model Tesla S70 costs £55,935 and can be leased very cost-effectively for about £584/m
A 40% taxpayer will pay £448pa in benefit-in-kind tax, but a 40% taxpayer who sacrifices £584/m in salary will save tax of £2,940pa – in other words, the taxman will pay £2492pa towards your car!
The employer will also save tax. They will pay NIC on the benefit-in-kind of £155 but save a tax of £1,055 on the salary sacrificed, a net saving of £900pa. If the employer is VAT registered and the car is leased, they will also be able to save half of the VAT paid on the car lease – which would be around £700pa.
All of this means that the individual will save around upwards of £1492pa in tax – result!
In the interests of fairness, I should point out that all fully electric cars have a 2% rate of benefit-in-kind taxation. But the problem is that some of them don’t really have a worthwhile range.
Let us know if you would like our help in organising your salary exchange. Call me on 01234 752 566 or email [email protected]
