SALARY sacrifice. Doesn’t sound good does it? We all like to keep as much money in our pocket or monthly wage packet as possible.
But it can work to your benefit when it comes to cars.
So what is salary sacrifice?
Well, you’ve asked, so I had better get on with explaining.
Once the car has been delivered, the employer will deduct the sacrificed salary from the employee’s gross salary
It’s a formal agreement where an employee agrees to accept a lower salary but in return receives a benefit from their employer.
These arrangements are worthwhile so long as the employee pays a lower rate of income tax on the benefit than they would have paid if they had taken the salary.
So how does salary sacrifice work with cars?
Under a car salary sacrifice scheme an employee foregoes part of their salary (the sacrifice bit), saving their employer the cost of the sacrificed salary and Class 1 National Insurance Contributions. The employer incurs the cost of leasing the car and pays Class 1A NIC on the benefit in kind.