Essential Guide to Salary Sacrifice Car Schemes

© 2012 Leasedrive Velo Group Ltd. Crowthorne House, Nine Mile Ride, Wokingham, Berkshire RG40 3GA United Kingdom

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A salary sacrifice car scheme is an excellent employee benefit, allowing employers to save money on the provision of new cars. The employee also saves money obtaining a new car through the salary sacrifice car scheme. Cars provided via the mycar salary sacrifice car scheme are treated as company cars and are liable to Benefit in Kind (BIK) tax. The tax is based on the P11D value of the car and its CO2 emissions. The lower the P11D value and CO2 emissions of the car, the lower the BIK tax. Employers save money through a reduction in the National Insurance Contribution (NIC) paid on the salary sacrificed. However employers do have to pay Class 1A NIC on the cash equivalent of the benefit. The employee saves money through tax and NIC savings on the salary sacrificed. Employees do have to pay BIK tax for the car. Certain organisations and their employees can also make pension savings. Providing your employees with salary sacrifice cars considerably reduces the environmental impact associated with running a car, as generally new cars have lower emission rates compared to used cars. Salary sacrifice cars also reduce your duty of care risk compared to your employees using their own cars on business travel, as the cars are new, fully serviced, insured for business purposes, maintained and repaired, and all drivers undergo a driving licence check.