Salary Sacrifice

I've just ordered a 2016 Prius through a salary sacrifice scheme, it effectively means that you lease the car through the company. For those who arn't aware what a salary sacrifice scheme it means that the lease fee is taken from your wages before tax is taken and then you are charged a separate tax based on the vehicle, this is based on the value of the car and the CO2 emissions of it. This can be a big saving depending on the car you choose, hybrids and full electric cars are a lot cheaper in comparison to out right purchasing.

The saving I've made has mean't I can get the Business Plus (£26.5k/$35k) for the same monthly cost as what a BMW 116 (£21k/ .$27.8k) would cost me including running cost (except for fuel). What's surprised me is the amount of people in my company who have gone for large uneconomical vehicles that cost a lot more.

Have any other UK users got their Prius through salary sacrifice?

 

Yes, the car is basically treated as a company car so you pay the same tax as someone with a car supplied by the business as part of your job. The only difference is you and not the business pays for the vehicle, as far as the taxman (HMRC) is concerned it is covered by employment law and down to you and the business to decide how you are paid. Here's a bit more info from HMRC's website Salary sacrifice - Detailed guidance - GOV.UK

A lot of big businesses do these schemes, even the National Health Service and quite a few other public sector employers as well. The business also benefits as they save tax they would normal pay on the money you pay for the car. As you can see below the tax rate you pay varies quite a bit depending on the CO2 level.

Values in brackets are for diesels
0-50g/km – 7% (10%)
51-75g/km – 11% (14%)
76-94g/km – 15% (18%)
95-99g/km – 16% (19%)
100-104g/km – 17% (20%)
105-109g/km – 18% (21%)
110-114g/km – 19% (22%)
115-119g/km – 20% (23%)
120-124g/km – 21% (24%)
125-129g/km – 22% (25%)
130-134g/km – 23% (26%)
135-139g/km – 24% (27%)
140-144g/km – 25% (28%)
145-149g/km – 26% (29%)
150-154g/km – 27% (30%)
155-159g/km – 28% (31%)
160-164g/km – 29% (32%)
165-169g/km – 30% (33%)
170-174g/km – 31% (34%)
175-179g/km – 32% (35%)
180-184g/km – 33% (36%)
185-189g/km – 34% (37%)
190-194g/km – 35% (37%)
195-199g/km – 36% (37%)
200g/km or more - 37% (37%)

 

It's all part of the lease, that does mean that you don't continue to build no claims bonus. The only two things that you pay for are fuel and an insurance excess if you have an accident.

Have to say when our company introduced it it did seem to good to be true and to be honest there are a couple of negatives, for example as I've already said you don't build any no claims bonus on your insurance and once you have ordered a car you can't exit the scheme without a penalty fee until the contract is up. My place though have put insurance in place to cover the exit costs if your made redundant or can no longer drive through sickness.

 

It is a bit like that, I've had a little while to wait before I could enter the scheme so I'd looked into it in detail. It's always worth investing a little bit of time in understanding these things.

 

I only found out today that the 118 has a 2.0 litre engine that has been turned down.

 

Based on US prices it sounds about right, you don't pay it in one go though,it is taken monthly out of your wages and calculated by dividing the tax figure by the length of the lease.

For example for myself for the 15" Business Plus based on a 3 year lease the tax is £65 ($85) a month but I save £152 ($200) in income tax. The 17" would be £81 ($106) a month in tax and I would save £156 ($205) in income tax.

In total the difference in just the car benefit tax $756 but with both cars I would still be saving. The system is quite difficult to get your head around at first.

 

Normally I would, but by doing it this way I save around 30% on the vehicle and running costs over 3 years, it suddenly becomes worth the hassle of doing it.

 

Yes that's right.