Salary Sacrifice – The Key to EVs?
The traditional method of a leasing a car would either be 1) personal contract hire; or 2) business contract hire. In terms of the financial products, these operate almost identical in that you pay for a vehicle for a set amount of time (2-5 years) on a set mileage (5,000-50,000 per annum) and pay a set initial rental (fixed to 3/s or 6/s plus flexible payment and deposit options available).
The growth of leasing has actually been more in the “PCH” sector, where customers have favoured the fixed payment method for a set period of time with the ability to just hand the vehicle back at contract end. The need to own a car has very much been replaced by the need to use it; such is the case with other parts of lives! For electric vehicles, as customer confidence is still somewhat unsure on the future of EV car values, we find that contact hire/leasing is very much the main way to fund their new car.
But what about Salary Sacrifice (which we call Sal Sac)? Does this have a part to play in the EV transition. Salary sacrifice is, by definition, an agreement to reduce an employee’s entitlement to cash pay, usually in return for a non-cash benefit .
For an employer, you can set up a sacrifice scheme for your employee by amending their contract (with their agreement) to enable this change.
Of course, the cash earnings must not fall below the National Minimum Wage (NMW) as part of this adjustment. With a car, the importance of the Sal Sac is how it impacts on the employer/employee tax and National Insurance contributions; this needs to be adjusted following the introduction of the scheme. Effectively you need to ascertain the non-cash benefit by using the higher of 1) the amount of salary being given up; or 2) the earnings change under normal benefit in kind rules.
Is a car treated different under a Sal Sac? Like a company car, the employer/employee will need to take into account the value of the car and the emissions of the vehicle, as it is subject to the usual benefit in kind (BiK) rules. Using a company car, or Sal Sac car, is not free. As part of using the vehicle, the employee will incur deductions at source for this benefit. To calculate this exposure, you take the P11d value of the vehicle (which the dealership or broker can supply) and the vehicles emission (shown as CO2) and apply the employee’s respective income tax threshold.
Using a company car tax calculator/Sal Sac calculator like the Gensen tool, you can quickly ascertain how much the vehicle will be costing both the employer and employee in tax (income/national insurance etc). In a company car situation, the employer is paying for the vehicle, so they will normally organise the monthly rentals the service/maintenance and also the insurance on the vehicle. Where company cars have really switched on is that since April 2020, HMRC significantly changed the BiK % on electric cars to 0%, rising to a maximum of 2% until 2025. This means that company cars are very much a “free” benefit to a driver or, at the very most, a small nominal sum per month.
Will my employer offer Salary Sacrifice to me?
In contrast, a Sal Sac involves a deduction from the employee’s gross salary in order to pay for the vehicle. The company is not paying for the car, they are effectively deducting (or sacrificing) the amount from the employee’s salary. However, for a Sal Sac customer it isn’t just about the deduction from their pay, they also need to take into account the benefit in kind values too. For combustion engines and EVs pre-2020, the Salary sacrifice route was not that popular and we found that customers were almost certainly better pursuing the more traditional PCH routes.
With a swathe of great EVs now available, all with 0g/km emissions, the culture towards electric cars changed. You may have seen a number of NHS workers, who benefit from an incredible salary sacrifice scheme, adopting an EV. But why do this as opposed to purchase/lease the EV yourself? Because the amount is deducted from your gross salary, as an employee you reduce the amount which is subject to national insurance and income tax. This is better than using money you have paid tax on to lease the goods yourself.
Also take into account the fact that some Sal Sac schemes allow employees access to better deals than you would achieve directly due to economies of scale plus this keeps a credit based product from your personal credit file. Not every employee can actually lease a vehicle – maybe they are getting a mortgage? Maybe they have poor or bad credit? In these instances, you can see just why the Sal Sac scheme is so ideal.
But does your employer have to provide you with a Salary Sacrifice or Company Car arrangement? There is no obligation on your employer to do so and you cannot force your director or human resources team to put this in place. While it is worth asking about Sal Sac, there are some costs to your employer for administering this arrangement. Of course by using an EV, your employer may be amenable as part of furthering environmental sustainability and enhancing staff retention. This is a great benefit to offer your team!
Thank you to our personal leasing customer, from Southampton, for sending photos of their new lease car.
In terms of the car shown, the Hyundai Kona Premium 64kWh 5dr Auto (Pure Electric Vehicle), this is based on the following configuration:
- Pulse Red Pearl Paint
- Cloth – Black
- 17″ alloy wheels
- Type 2 charging cable and an emergency three-pin ICCB (In-Cable Control Box) cable
As standard the car includes 10.25” touchscreen navigation, 17” alloys, 60/40 split folding seats, alarm/immobiliser, ambient lighting, auto dimming rear view mirror, autonomous emergency braking, blind spot monitoring, Bluetooth, cruise control, DAB radio.
Driver’s electric adjustable lumbar support, Forward collision warning, Front parking sensor, Full LED headlights, Heated front seats, Heated steering wheel, Krell premium audio system with 8 speakers and subwoofer, Hill start assist control.
Lane follow assist, Lane keep assist, Parking system with rear camera and guidance system, Rear parking sensor, Smart key with keyless entry and engine start/stop button, Smartphone integration with Apple CarPlay and Android auto, Smartphone wireless charging plate and Vehicle Stability Control. In terms of additional options, you can only add the heat pump.
On the technical-side, company car and business users can note the P11d at £35,560.00 and CO2 at 0g/km. The Kona has a usable lithium-ion battery of 64kWh which offers a cold weather range of around 205 miles and summer range of around 285 miles.
In terms of performance, the bigger battery Kona offers 200ps, 0-62 times of 7.9 seconds and top speeds of 104mph. In terms of charging, the maximum charge AC is 11kW, which will allow 0-100% charging in around 7 hours. For rapid charging, expect a 77kW DC maximum to offer 10-80% in around 45 minutes.
Charging times for the Hyundai Kona 64kWh EV – AC:
Charging times for the Hyundai Kona 64kWh EV – DC: