UK Bike to Work Scheme - Salary Sacrifice Hi, Does anyone know how to set up the payroll to account for the salary sacrifice related to the UK Bike to Work scheme? The key to this is salary sacrifice, the same system many employers use for pension contributions, cycle to work schemes, and childcare vouchers, allowing workers to … Saturday, Sunday and Bank Holidays, closed. In this arrangement a company leases the car on behalf of the employee. As an employer, you can set up a salary sacrifice arrangement by changing the terms of your employee’s employment contract. If you have £2,000 a month gross pay, you would take home £1,571 after tax and National Insurance. 3 pages) Ask a question Practical Law may have moderated questions and answers before publication. Salary sacrifice lets you make contributions to your pension and helps to save on National Insurance at the same time. It can also be referred to as ‘salary exchange’ and one of its most common uses is increasing pension contributions. Some benefits will continue to be offered PAYE and NI-free through salary sacrifice schemes after April 2017. With a salary sacrifice scheme, you can lease a car with no initial, upfront costs on monthly payments and no further obligations at the end of the leasing term. Your company rents the car from a supplier, such as LeasePlan, and you rent it from your employer. When it starts, you’ll get 20% of your yearly childcare bill paid for by government. It is important to note the rules around salary sacrifice schemes for low paid workers. Practical Law Resource ID 4-521-8775 (Approx. There are no deposits or credit checks for salary sacrifice, and your monthly payment includes: If your company uses LeasePlan’s SalaryPlan salary sacrifice scheme, you can choose an electric vehicle from an approved list every two to three years. You agree to sacrifice part of your salary and your employer gives you tax-free vouchers that you can use to pay for childcare. For all other schemes the protection runs until the end date of the agreement, or until 5 April 2018, whichever is sooner. You give up part of your salary and, in return, your employer gives you a non-cash benefit, such as childcare vouchers, or increased pension contributions. What happens on a TUPE transfer to salary sacrifice schemes providing cycles or computers? The benefits offered as part of this scheme within this organisation are pension contributions. The idea behind this is fairly straightforward. But is it worth doing? Our salary sacrifice scheme allows your employees to slightly reduce their gross salary in return for the use of a non-cash benefit. Benefit in Kind tax (BIK) is 0% for 2020/21, 1% for 2021/22, and 2% for 2022/23. An electric vehicle salary sacrifice scheme lets an employee pay for an electric car each month using their gross salary – that’s before tax and other contributions are deducted. There will be some protection for staff joining these schemes before the April deadline (see below). Any lease can be purchased through salary sacrifice. Caroline Sandall, a specialist fleet consultant, says:“We’re not just talking about pure affordability, but being able to access vehicles that [employees] otherwise could not afford if they were dealing on a purely retail basis”. Example based on 40% tax payer, 36 months and 15000 miles per annum. Does your employer run a salary sacrifice scheme? Examples of this include: A salary sacrifice scheme is an arrangement between you and your employer, where you give up or ‘sacrifice’ a portion of your salary in exchange for other, non-cash benefits. From September 2017, working parents of three and four-year-olds will be able to get 30 hours’ free childcare a week, worth around £5,000 a year per child. Examples of salary sacrifice schemes and employee benefits. The employee then gains access to a brand-new car, with all running and maintenance costs included. Labels: QuickBooks Online Payroll; 1 Kudo Cheer Reply. The Charter School in North Dulwich has its own employee benefits scheme. In the ‘Thinking of EV? Lower earnings might also affect your State Pension or contribution-based state benefits. Consumer hire agreement, authorisation and exemption 11 Overview 11 6. You will continue to receive National Insurance savings and should still retain existing savings enjoyed from being a member of a Salary Sacrifice. Schemes which allow salary sacrifice to make pension contributions tend to be available for earners at all levels, both low and high. Many employers offer salary sacrifice schemes, giving staff an opportunity to exchange part of their salary for a non-cash benefit such as childcare vouchers, a bike or company car. Sorry, web chat is only available on What is salary sacrifice? Which is why they’re encouraging businesses and their employees to switch to an EV by offering a tax-efficient way to pay for your lease – AKA Salary Sacrifice. Typical salary sacrifice electric car prices. - Get free trusted guidance and links to direct support. Not all employers offer salary sacrifice, so check with your employer or visit your scheme website. Some employers pass on some or all of these savings to you. BIK is the value of the benefit you receive – in this case, a car. A salary sacrifice arrangement must not reduce an employee’s cash earnings below the National Minimum Wage (NMW) rates. Registered in England with company number: 01397939. In addition, your employer will not have to pay their Employers’ National Insurance contributions on the part you sacrifice. But with the childcare vouchers, you would now have £1,406 + £243 = £1,649 in total. Pooled Schemes 6 3. Our general email address is Essentially, the same as what you’d pay anyway, but with a new, clean car for a cheaper cost. What are the drawbacks of electric car salary sacrifice? *Subject to excess mileage and fair wear and tear charges. Employees enrolled in a car, accommodation or school fee salary sacrifice agreement, before 6 April 2017, will be protected until the end date of their agreement, or until 5 April 2021, whichever is sooner. It’s worth checking – some employers do provide life cover at your original salary so you don’t lose out. How a salary sacrifice scheme works 7 Overview 7 4. Accepting childcare vouchers from your employer might affect your tax credits. It changed the way some company cars were taxed - fortunately, it doesn’t affect electric cars on salary sacrifice. If you joined before then, you can have up to £243 a month. The government tops up your account with a 20% contribution (the same as the basic rate of tax), up to a maximum contribution of £2,000 a year per child. However, it’s likely that this is the first time as an employer that you will have to include benefits provided to your employees through a salary sacrifice scheme. - Get free trusted guidance and links to direct support, Clear English Award - Opens in a new window, Money manager for Universal Credit claimants, Workplace pensions contribution calculator, Things to consider before taking a salary sacrifice, Changes to employee benefits from April 2017, How your employer can help with childcare costs, Defined benefit pension schemes explained, How much Income Tax and National Insurance you should pay, We can’t separate money worries from our mental health, Benefits and tax credits when you’ve lost your job, Pay and benefits for temps and agency workers, Changing your career following redundancy, Employment contracts and your employee rights explained, How Income Tax, National Insurance and the Personal Allowance works, Scottish Income Tax and National Insurance, Coronavirus – what it means for you and what you’re entitled to, Employed and furloughed: The coronavirus job retention scheme, Employed, off sick or self-isolating: claiming Statutory Sick Pay, Tax and National Insurance when you're self-employed, How to fill in a Self Assessment tax return. £110 a month (if you have joined the scheme on or after 6 April 2011). © Copyright 2021 The Money Advice Service 120 Holborn, London EC1N 2TD. Salary sacrifice enables you to exchange part of your salary for a non-cash benefit from your employer, such as increased pension contributions. Take a test drive in an Audi e-tron. The idea behind this is quite simple. Starting with the basics, car salary sacrifice schemes mean you exchange some of your pre-tax salary for the benefit of a car instead. Salary Sacrifice helps every part of your business The Government want you to drive electric as much as we do. If you want to drive an electric car and your employer offers a salary sacrifice scheme, there are no specific drawbacks. How refreshing! An electric vehicle salary sacrifice scheme lets an employee pay for an electric car each month using their gross salary – that’s before tax and other contributions are deducted. How salary sacrifice works. The salary sacrifice scheme 8 Overview 8 Eligibility 9 Equipment included 10 Inclusivity and adapted cycles 10 5. : financial help during the coronavirus outbreak, Self-employed: financial help if you’ve lost business income, Self-employed: financial help if you’re sick or self-isolating. This is a great option for employees who may not qualify for a company car. The employee finances the car through payroll deductions and take advantage of the employer's right to deduct VAT and reduced social security contributions. However, you might be able to claim more tax credits. Please note: As there are so many salary sacrifice schemes and different terms and conditions, we advise you check with your employer’s benefits or human resources team (or dedicated intranet websites, if available) whether there are any additional benefits and risks associated with belonging to these schemes. Salary sacrifice schemes are a contractual agreement between you and your employer to give up part of your salary in exchange for a non-cash benefit such as pension contributions, childcare support, bicycles, and ultra-low emission cars. If this is the case then the employee is not entitled to participate in the scheme. You would be £78 better off because of the tax and National Insurance you’ve saved. What are the benefits of electric car salary sacrifice? This means that many higher-rate taxpayers are likely to agree to salary sacrifice pension schemes. Because the non-cash benefit is taxed at a lower rate than earnings, it’s seen as a cost-neutral option for both parties. cookies policy. Monthly costs will depend on the car, your salary and your lifestyle, but here are some broad examples to give you an idea of how much an electric car costs on salary sacrifice: *For illustration purposes only. Salary sacrifice’ podcast, Matthew Walters, LeasePlan’s Head of Consultancy and Customer Data Services, says: “With a 0% company car tax tariff […] those vehicles, through salary sacrifice, become phenomenally cost-effective and very, very cheap”. More details can be found in our Road fund licence, manufacturer servicing, breakdown cover, fully comprehensive insurance and one vehicle charge point are included for the duration of the term. internet browsers with JavaScript. New innovative employee car scheme now available Maxxia’s car scheme … Our consultancy team would love to help.If you’re a business owner, HR manager or fleet manager – get in touch: How electric car salary sacrifice schemes work, What’s included with electric car salary sacrifice. These might include Jobseeker’s Allowance and Employment and Support Allowance. Our salary sacrifice schemes can improve your employees’ ability to afford both everyday essentials and luxuries by contributing directly from their payslips. It’s what has helped make salary sacrifice the cheapest way to own an electric car. Cycle to Work scheme providers 14 Overview 14 7. Cars, insurance and other employee benefits. If the organisation you work for offers a salary sacrifice scheme, then you’ll be eligible to opt in depending on the terms set out by your employer.