Salary sacrifice leasing

[McAndy]

I’m am not good at understanding personal tax terms as a simple PAYE, never had to really think about it. We are evaluating an EV scheme at work. Please can somebody explain the gross and net in simple terms? Is it how much leaves your pay check, vs how much that is actually “worth” once you add in the increased “value” of that money through not paying tax on it?

[TheDrownedApe]

McAndy said:

I’m am not good at understanding personal tax terms as a simple PAYE, never had to really think about it. We are evaluating an EV scheme at work. Please can somebody explain the gross and net in simple terms? Is it how much leaves your pay check, vs how much that is actually “worth” once you add in the increased “value” of that money through not paying tax on it?

its easy once you understand it



Look at the net pay (take home) with and without the lease and that's YOUR cost difference (without worrying about lower pension contributions etc). I;ve never bothered with the "worth" figure and not sure what that calculates but IDK.

Then you need to look at the personal lease costs of an equivalent car and the costs. Most SS lease include insurance and maintenance where as you pay extra on a personal lease. Plus no deposit.

However on my companies scheme there was ONLY 1 car that made financial sense. A 36m/10k car with P11D of £47k equates to gross £661; no other car came close to those figures, even those with £15k cheaper base cost.

Just remember it reduces your pay and that figure might have an adverse effect on mortgage apps etc.

Edited by TheDrownedApe on Thursday 6th October 08:56

Edited by TheDrownedApe on Thursday 6th October 09:01

[PushedDover]

SWoll said:

It's a winning deal as to get those figures you'd need to be earning £115-125k and the payment for the car is saving you the maximum possible amount due to offsettig the loss of personal allowance above £100k and essentially 60% tax.

At current SS rates, for that level of earnings, a £106k Porsche Taycan GTS would only be a couple of hundred quid more NET despite costing 50% more gross. It's the absolute sweetspot for salary sacrifice as someone earning £100k or £140k would be paying closer to £650 a month.

48 month deals will always come in 10-15% cheaper than 36.

Not the case when I looked at the scheme originally.

IIRC. the Tesla MY was circa £400 (as above) , the Taycan CT (boggo spec) was circa £800 pm. Shame as as lovely thing. I was almost tempted but in reality glad I didnt this time round. What also firmly swung the decision was I could get in tot the Teslas in 6 weeks. The Taycan was 56 weeks.

[WhiskyDisco]

Hi folks. I'm trying to get my head around this. Assuming that I earn a decent whack and I have been putting money away for pension etc, but I am still lucky enough to earn £115k a year.

If I were to sacrifice £1,290 a month (£15,380 a year) for the car below I would effectively be able to drive around in a car that I choose to "swap" a net £516 a month for. £15,380 x 0.40 = a take home of £6,192 (or £516 a month).

So the question isn't really would you sacrifice £15k a year it's more like would you sacrifice £6k a year take home pay for a car like this.

[keeling54]

WhiskyDisco said:

Hi folks. I'm trying to get my head around this. Assuming that I earn a decent whack and I have been putting money away for pension etc, but I am still lucky enough to earn £115k a year.

If I were to sacrifice £1,290 a month (£15,380 a year) for the car below I would effectively be able to drive around in a car that I choose to "swap" a net £516 a month for. £15,380 x 0.40 = a take home of £6,192 (or £516 a month).

So the question isn't really would you sacrifice £15k a year it's more like would you sacrifice £6k a year take home pay for a car like this.

We have a similar deal at our place, I'm not brave enough to commit to one of these but my boss has, 18 month wait though.

[SWoll]

WhiskyDisco said:

Hi folks. I'm trying to get my head around this. Assuming that I earn a decent whack and I have been putting money away for pension etc, but I am still lucky enough to earn £115k a year.

If I were to sacrifice £1,290 a month (£15,380 a year) for the car below I would effectively be able to drive around in a car that I choose to "swap" a net £516 a month for. £15,380 x 0.40 = a take home of £6,192 (or £516 a month).

So the question isn't really would you sacrifice £15k a year it's more like would you sacrifice £6k a year take home pay for a car like this.

Yep. As mentioned earning between £100-125k and keeping the entire gross cost between those figures is the ultimate sweetspot for salary sacrifice as with the loss of personal allowance between those figures you're avoiding a marginal tax rate of 60%.

If you were earning £100k then the same car would be costing an additional £150-200 per month.

McAndy said:

I’m am not good at understanding personal tax terms as a simple PAYE, never had to really think about it. We are evaluating an EV scheme at work. Please can somebody explain the gross and net in simple terms? Is it how much leaves your pay check, vs how much that is actually “worth” once you add in the increased “value” of that money through not paying tax on it?

The comcar calculator does a decent job of demistifying it, but in simple terms you are correct.

https://comcar.co.uk/taxtools/salarysacrifice/

Edited by SWoll on Friday 7th October 23:29

[McAndy]

Thanks SWoll

[SWoll]

McAndy said:

Thanks SWoll

[jgrewal]

Tempted by this route to get a fully loaded Ioniq 5 through Tusker on NHS for £565 net on my wife's salary sacrifice scheme. Few things put me off though - impact on her pension for the reduced income (she is 40% tax payer) and the fact we cannot keep our no claims from her current car on the insurance as I assume insurance is centrally managed at fleet level.

Loads cheaper than a private lease (£5k deposit, £490 per month, insurance + servicing, tyres on top). While of course this would be all in! Anyone had a bad experience with this?

Edited by jgrewal on Sunday 9th October 22:25

[Heres Johnny]

Most of the above calculations seem to be missing BIK. On a £120k car is £2400 a year, £200 a month and at 50% tax it adds £100 to your tax bill each month. Still a good deal (unless you buy the car personally, lose very little in depreciation over its life, a current bubble that will however eventually burst, and are getting 45p and not 5p per business mile).

[anonymous-user]

Heres Johnny said:

Most of the above calculations seem to be missing BIK. On a £120k car is £2400 a year, £200 a month and at 50% tax it adds £100 to your tax bill each month. Still a good deal (unless you buy the car personally, lose very little in depreciation over its life, a current bubble that will however eventually burst, and are getting 45p and not 5p per business mile).

I’m with Zenith and the BIK is factored into the net monthly price quoted.

[Harry Flashman]

jgrewal said:

Tempted by this route to get a fully loaded Ioniq 5 through Tusker on NHS for £565 net on my wife's salary sacrifice scheme. Few things put me off though - impact on her pension for the reduced income (she is 40% tax payer) and the fact we cannot keep our no claims from her current car on the insurance as I assume insurance is centrally managed at fleet level.

Loads cheaper than a private lease (£5k deposit, £490 per month, insurance + servicing, tyres on top). While of course this would be all in! Anyone had a bad experience with this?

Edited by jgrewal on Sunday 9th October 22:25

Is that really "loads cheaper" though? You are paying an extra £75 a month for the sacrifice scheme, or £900 a year. Depending on your actual mileage and insurance quote, it may not be very much cheaper at all.

Our Leaf does 3000 miles a year, and insurance is £350 a year. Servicing at just over £100 a year when evened out over the three year term. Doubt we will need new tyres at our mileage.

Work on the use case, not just assumptions!

[AyBee]

SWoll said:

Yep. As mentioned earning between £100-125k and keeping the entire gross cost between those figures is the ultimate sweetspot for salary sacrifice as with the loss of personal allowance between those figures you're avoiding a marginal tax rate of 60%.

If you were earning £100k then the same car would be costing an additional £150-200 per month.

Or indeed £140k-£165k if you were to maximise pension allowance too.

[SWoll]

Harry Flashman said:

jgrewal said:

Tempted by this route to get a fully loaded Ioniq 5 through Tusker on NHS for £565 net on my wife's salary sacrifice scheme. Few things put me off though - impact on her pension for the reduced income (she is 40% tax payer) and the fact we cannot keep our no claims from her current car on the insurance as I assume insurance is centrally managed at fleet level.

Loads cheaper than a private lease (£5k deposit, £490 per month, insurance + servicing, tyres on top). While of course this would be all in! Anyone had a bad experience with this?

Edited by jgrewal on Sunday 9th October 22:25

Is that really "loads cheaper" though? You are paying an extra £75 a month for the sacrifice scheme, or £900 a year. Depending on your actual mileage and insurance quote, it may not be very much cheaper at all.

Our Leaf does 3000 miles a year, and insurance is £350 a year. Servicing at just over £100 a year when evened out over the three year term. Doubt we will need new tyres at our mileage.

Work on the use case, not just assumptions!

You appear to have mised the £5k deposit required for the personal lease? Assuming a 3 year deal that means it's actually costing the equivalent of £615 a month before insurance etc.

[Sheepshanks]

jgrewal said:

... and the fact we cannot keep our no claims from her current car on the insurance as I assume insurance is centrally managed at fleet level.

I wouldn't worry about that - insurers seem to go mainly on driving record. When I opted out of a company car some would give 5yrs introductory bonus but there was no great price difference with those who wouldn't.

[jgrewal]

Thanks for the feedback guys. Not bad on the insurance aspect then and yes need to factor on the hefty deposit (which is not needed on the salary sacrifice).

[SWoll]

jgrewal said:

Thanks for the feedback guys. Not bad on the insurance aspect then and yes need to factor on the hefty deposit (which is not needed on the salary sacrifice).

Also would need to confirm for yourself, but most SS deals have insurance against early termination baked into the cost so are a lot easier to walk away from at short notice should circumstances change than with a personal lease.

[AyBee]

SWoll said:

jgrewal said:

Thanks for the feedback guys. Not bad on the insurance aspect then and yes need to factor on the hefty deposit (which is not needed on the salary sacrifice).

Also would need to confirm for yourself, but most SS deals have insurance against early termination baked into the cost so are a lot easier to walk away from at short notice should circumstances change than with a personal lease.

Which is an interesting concept in itself. I think my scheme can hand back 10 cars per year with no cost (company of <100 employees) so I'd be better off on a 4-year deal than a 3.

[SWoll]

AyBee said:

SWoll said:

jgrewal said:

Thanks for the feedback guys. Not bad on the insurance aspect then and yes need to factor on the hefty deposit (which is not needed on the salary sacrifice).

Also would need to confirm for yourself, but most SS deals have insurance against early termination baked into the cost so are a lot easier to walk away from at short notice should circumstances change than with a personal lease.

Which is an interesting concept in itself. I think my scheme can hand back 10 cars per year with no cost (company of <100 employees) so I'd be better off on a 4-year deal than a 3.

Assuming your company was happy to agree to it then you would likely save 10-15% on your monthly payments based on quotes I've seen.

[z4RRSchris]

i'm waiting for a Y, works out just under £600pm on a 45% taxpayer.

My man maths was i get a new car for £600pm and my range / z4 combo is costing around £500pm.

still waiting.