Lease via salary sacrifice

[thebullettrain]

Can anybody explain the up and down side of salary sacrifice and getting a new car?

All old school cars are very expensive (it’s the BIK I understand). Electric cars offer better value. I can get a Tesla 3 Performance for £450 a month all maintained.

Apparently it will go up slightly as the BIK changes during subsequent tax years, but I’m “saving” several hundred pounds by using salary sacrifice.

Could someone seek to help demystify please?

[gangzoom]

If you are on the NHS scheme you need to calculate your pension reduction longterm for any salary sacrifice scheme. The amount by which your pension will be effected varies hugely based on personal situation.

For me the numbers on NHS salary sacrifice just didn't work out, especially when you consider you are giving up longterm pension benefits for effective a rental car.

[200Plus Club]

If you don't intend staying in that pension scheme or relying on it then it may not matter to you . If as above your intending relying on it (final salary within last 3 yrs or career average type scheme) then it will probably cost you a fortune over the long term once in receipt of pension.
I can't see why you'd impact a good pension scheme then just to have a new car now.

[gangzoom]

thebullettrain said:

I’m a private sector worker so no final salary pension scheme for me.

In which case it should all be good, the 'savings' for your Employer are not having to pay NI/pensions and for you reduction in higher tax rate, so win-win for everyone.

[TwigtheWonderkid]

Taking a car on salary sacrifice will impact on any death in service benefit and future mortgage applications, both of which will be based on your lower post sacrifice salary.

[egor110]

thebullettrain said:

Can anybody explain the up and down side of salary sacrifice and getting a new car?

All old school cars are very expensive (it’s the BIK I understand). Electric cars offer better value. I can get a Tesla 3 Performance for £450 a month all maintained.

Apparently it will go up slightly as the BIK changes during subsequent tax years, but I’m “saving” several hundred pounds by using salary sacrifice.

Could someone seek to help demystify please?

How are old school cars expensive ?

For a grand you can buy a perfectly reliable car for what 2 maybe 3 weeks wage .

Your talking about 450 month plus how many thousand deposit .

[iphonedyou]

egor110 said:

How are old school cars expensive ?

For a grand you can buy a perfectly reliable car for what 2 maybe 3 weeks wage .

Your talking about 450 month plus how many thousand deposit .

You've not so much got the wrong end of the stick as a different stick.

He means they're expensive as in anything interesting and petrol is taxed at very punitive rates.

[egor110]

iphonedyou said:

egor110 said:

How are old school cars expensive ?

For a grand you can buy a perfectly reliable car for what 2 maybe 3 weeks wage .

Your talking about 450 month plus how many thousand deposit .

You've not so much got the wrong end of the stick as a different stick.

He means they're expensive as in anything interesting and petrol is taxed at very punitive rates.

I see .

Re salary sacrifice , doesn't it affect how much national insurance you pay ?

[Nano2nd]

TwigtheWonderkid said:

Taking a car on salary sacrifice will impact on any death in service benefit and future mortgage applications, both of which will be based on your lower post sacrifice salary.

nonsense!

[DangerMonkey]

These schemes are great, especially with the low BIK but be aware of the small print. Uncertain times right now and if you lose or leave your job, you might find that you're on the hook for the lease but without the tax savings that made it worthwhile in the first place.

[TwigtheWonderkid]

Nano2nd said:

TwigtheWonderkid said:

Taking a car on salary sacrifice will impact on any death in service benefit and future mortgage applications, both of which will be based on your lower post sacrifice salary.

nonsense!

It really isn't.

[2 GKC]

thebullettrain said:

As an employee, you pay for the car from your gross pay, so you get income tax and national insurance savings. Your employer saves on class 1a national insurance too.

Class 1 surely?

[TwigtheWonderkid]

2 GKC said:

thebullettrain said:

As an employee, you pay for the car from your gross pay, so you get income tax and national insurance savings. Your employer saves on class 1a national insurance too.

Class 1 surely?

Technically speaking, your gross pay is now the post sacrifice figure. So you earn £40K, and you do say £10K salary sacrifice scheme for whatever, car, pension contribution etc. Your gross pay is now £30K. The £10K you don't earn at all. You now earn £30K, and your employer also makes a contribution to your pension, or funds a car, in addition to your gross salary.

That's why your death in service benefit and your mortgage application will be based on £30K.

[blank]

It depends on the company.

At my place, everything that is calculated based on salary is based on the figure before any sacrifices.

Mortgage application will be based on net pay and outgoings (affordability) these days anyway. So a salary sacrifice lease would be better than a normal one paid from net income if the overall net cost was lower.

[TwigtheWonderkid]

blank said:

It depends on the company.

At my place, everything that is calculated based on salary is based on the figure before any sacrifices.

That's very rare.And the DIS benefit settlement isn't the decision of the employer, but the insurance company covering it. And they almost always pay out based on gross taxable income. But many employers don't realise that and give their staff the wrong info. Fortunately, the mistake is rarely discovered.

[Nano2nd]

TwigtheWonderkid said:

Nano2nd said:

TwigtheWonderkid said:

Taking a car on salary sacrifice will impact on any death in service benefit and future mortgage applications, both of which will be based on your lower post sacrifice salary.

nonsense!

It really isn't.

it really is, i do salary sacrifice for various benefits at work and my death in service is attributed to my salary before any salary sacrifice is taken. I recently re-mortgaged and Natwest specifically asked for my base salary before any salary sacrifice/deductions, of course affordability checks are done on net income but that's actually worst if your taking your lease out of net rather than gross, so in this scenario it helps with affordability via salary sacrifice.

[SausageBap]

I've just ordered and Audi E-Tron on our company salary sacrifice scheme. My pension and other benefits are not affected and are calculated on contracted gross salary. With the 0% BIK on EV this year then it makes these a good deal at the moment.

Another possible benefit is if you earn between £100k-£125k you start to lose your personal allowance(£1 for every £2 earnt over £100k), using a salary sacrifice scheme is one way of reducing your gross pay in the eyes of HRMC and therefore get some of your personal allowance back.

[TwigtheWonderkid]

Who told you guys that your death in service is unaffected by salary sacrifice, your employer's HR bods or the actual insurer. If it's the former, I suggest that you ask them to get a letter of confirmation from the insurer. Because whilsts it's possible, it's rarer than rocking horse st.

As for mortgage applications, I've recently been thru this with my son. The two providers we approached both wanted annual salary, after any salary sacrifice. Logically, this makes sense. If they are offering say 5 times salary, they want to loan of 5 times what you earn, not 5 times what you could be earning if you hadn't chosen to give up part of your salary.