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  • FIRST POST
    • n15h
    • By n15h 20th Sep 16, 11:37 AM
    • 101Posts
    • 5,387Thanks
    n15h
    Employee Salary Sacrifice Car Scheme - how does it work?
    • #1
    • 20th Sep 16, 11:37 AM
    Employee Salary Sacrifice Car Scheme - how does it work? 20th Sep 16 at 11:37 AM
    Hi, Iím looking for some guidance on how I can calculate whether it will be financially wise for me to join the employee car scheme at work.

    The business I work for, provides all employees with the opportunity to join this car scheme with a well known car fleet provider. The scheme monthly price includes the cost of the car, fully comprehensive business insurance (although I do not use my car for business travel), breakdown and recovery, servicing and maintenance, tax, windscreen & glass cover, replacement tyres.

    The monthly payment for the car will be taken before income tax and national insurance is paid on my monthly salary. I have to select milage and term periods Ė I am looking at 7000 miles a year for 3 years

    The car I am interested in is a Honda Civic 1.6 iDtec SE Plus Navi that has the following stats:
    MPG 78.5
    CO2 94
    P11D £21694.99

    The employee website gives me an indicative net sacrifice quote of £329.89 for this car. However, I donít understand how this has been calculated and whether I will be a making a financially sound decision if I join the car scheme. I had never even heard of ĎP11Dí and have no idea what this means.

    Any help / guidance / calculators on this would be greatly appreciated.

    I am new to this car finance thing so I apologise if anything above doesnít make sense Ė let me know and I will clarify further.

    Thanks in advance.
    Thousands of candles can be lit from a single candle, and the life of the candle will not be shortened. Happiness never decreases by being shared - Buddha
Page 1
    • TadleyBaggie
    • By TadleyBaggie 20th Sep 16, 11:46 AM
    • 1,840 Posts
    • 1,285 Thanks
    TadleyBaggie
    • #2
    • 20th Sep 16, 11:46 AM
    • #2
    • 20th Sep 16, 11:46 AM
    P11D is the form that the employer send to HMRC (you also have a copy) that details the benefits an employee has had in the previous year. Such as medical insurance, company car etc.
    • facade
    • By facade 20th Sep 16, 5:39 PM
    • 2,056 Posts
    • 1,074 Thanks
    facade
    • #3
    • 20th Sep 16, 5:39 PM
    • #3
    • 20th Sep 16, 5:39 PM
    Your tax code will change so you pay an extra fortune in income tax.
    HMRC need to recoup their "losses" (and then some) by what appears to be a reduction in your gross salary.

    Ordinary tax payers never "beat them"
    I want to go back to The Olden Days, when every single thing that I can think of was better.....

    (except air quality and Medical Science )
    • n15h
    • By n15h 21st Sep 16, 10:20 AM
    • 101 Posts
    • 5,387 Thanks
    n15h
    • #4
    • 21st Sep 16, 10:20 AM
    • #4
    • 21st Sep 16, 10:20 AM
    Thanks both. I'm still unsure of how this all works, however one thing is for sure, HMRC will always win.

    What I'd like to do is be able to make a sound decision on whether joining the car scheme will be a good financial choice (plus the added benefit of getting a new car).
    Thousands of candles can be lit from a single candle, and the life of the candle will not be shortened. Happiness never decreases by being shared - Buddha
    • jaybeetoo
    • By jaybeetoo 21st Sep 16, 1:21 PM
    • 535 Posts
    • 254 Thanks
    jaybeetoo
    • #5
    • 21st Sep 16, 1:21 PM
    • #5
    • 21st Sep 16, 1:21 PM
    Salary sacrifice for company cars will probably be abolished next year so work out the costs of taking a company car without salary sacrifice.

    https://www.gov.uk/government/consultations/salary-sacrifice-for-the-provision-of-benefits-in-kind
    • bod1467
    • By bod1467 21st Sep 16, 1:36 PM
    • 14,782 Posts
    • 13,399 Thanks
    bod1467
    • #6
    • 21st Sep 16, 1:36 PM
    • #6
    • 21st Sep 16, 1:36 PM
    I have a company car (not using salary sacrifice). The P11D value is £23,395 and my monthly BIK is near £430. I then pay tax on that value each month.

    This link might help:

    http://comcar.co.uk/newcar/companycar/taxcalc/
    Got a Parking Charge Notice (parking ticket - IT'S NOT A FINE!)? Go here for further info ...
    Main site > MoneySavingExpert.com Forums > Household & Travel > Motoring > Parking Tickets, Fines & Parking >
    ... and click on the NEWBIES sticky thread (4816822)
    Please do not PM me for help - I will not offer help via PM.
    • zagfles
    • By zagfles 21st Sep 16, 6:53 PM
    • 10,994 Posts
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    zagfles
    • #7
    • 21st Sep 16, 6:53 PM
    • #7
    • 21st Sep 16, 6:53 PM
    Salary sacrifice for company cars will probably be abolished next year so work out the costs of taking a company car without salary sacrifice.

    https://www.gov.uk/government/consultations/salary-sacrifice-for-the-provision-of-benefits-in-kind
    Originally posted by jaybeetoo
    It's not going to be abolished, all they're proposing is to apply tax & employer's NI to the higher of the current BIK value, and the actual amount sacrificed. Employee would still save NI as I understand it.
    • facade
    • By facade 22nd Sep 16, 7:24 AM
    • 2,056 Posts
    • 1,074 Thanks
    facade
    • #8
    • 22nd Sep 16, 7:24 AM
    • #8
    • 22nd Sep 16, 7:24 AM
    My understanding is limited, as I don't have the choice, but reducing salary reduces pension surely- maximising pension is something I wish I had been concerned about from day 1 of my employment.
    I want to go back to The Olden Days, when every single thing that I can think of was better.....

    (except air quality and Medical Science )
    • bod1467
    • By bod1467 22nd Sep 16, 9:41 AM
    • 14,782 Posts
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    bod1467
    • #9
    • 22nd Sep 16, 9:41 AM
    • #9
    • 22nd Sep 16, 9:41 AM
    reducing salary reduces pension surely
    Originally posted by facade
    Only if you're in a Defined Benefits (colloquially known as Final Salary) pension scheme. Most pensions these days are Defined Contributions ... the more you put in, the more you (potentially*) get out.

    * It's stock market based, so the outcome has a portion of risk - if the market crashes leading up to your retirement then, unless you've taken action to move some or all of your portfolio to stable funds, your "pension pot" could be severely impacted.

    Companies have moved from DB to DC schemes as it moves the risk from the employer to the employee.
    Got a Parking Charge Notice (parking ticket - IT'S NOT A FINE!)? Go here for further info ...
    Main site > MoneySavingExpert.com Forums > Household & Travel > Motoring > Parking Tickets, Fines & Parking >
    ... and click on the NEWBIES sticky thread (4816822)
    Please do not PM me for help - I will not offer help via PM.
    • Bigphil1474
    • By Bigphil1474 22nd Sep 16, 12:47 PM
    • 516 Posts
    • 207 Thanks
    Bigphil1474
    I have a reasonable basic understanding of the SSS. The monthly cost is deducted from your gross salary - so you save by paying for the car with money that would have been tax or NI. The employer also saves by not having to pay employers NI on that amount. e.g. £300 a month, you don't pay 20% tax or 12% NI, so it only actually costs you about £200 for the car. That's not including pensions.
    However, the car would normally be classed as a company car, so you receive a benefit in kind - this reduces your tax free allowance (on your P11d) - the amount it is reduced is relative to the BIK, so you have a lower tax free allowance, so would pay more tax on your net gross salary (after the car deduction but before tax). Not normally as much as the relative saving but depends on the car. Bear in mind there's no SERPS anymore, so not the same NI benefit on your works pension.
    As you don't use it for business, then you won't be hit by the other big penalty which is in relation to mileage payments.
    Pensions - if you pay a % of your gross salary into a works pension, because the gross salary you are being pensioned on is less, your pension payments will be less, so your pension will be less. If your employer also pays a % into your pension, their contributions will be less as well, so your pension could be affected significantly. This would apply for the duration of the scheme.
    On the upside, if you were thinking of buying a car anyway, work out what this scheme 'costs; against doing your own deal privately and you know if it's good or not. If this scheme makes a saving, you could consider making additional voluntary payments into your pension so you don't lose out that way, if that's an option.
    Having looked long and hard at my employers SSS, I gave it a big thumbs down, but I do get mileage payments so would have cost me much more.
    • jimjames
    • By jimjames 22nd Sep 16, 1:12 PM
    • 10,460 Posts
    • 8,444 Thanks
    jimjames
    Only if you're in a Defined Benefits (colloquially known as Final Salary) pension scheme. Most pensions these days are Defined Contributions ... the more you put in, the more you (potentially*) get out.
    Originally posted by bod1467
    That's not strictly true. If your employer pays 10% of salary into a DC scheme then if your salary is lower you'll get less paid in.
    Remember the saying: if it looks too good to be true it almost certainly is.
    • bod1467
    • By bod1467 22nd Sep 16, 2:29 PM
    • 14,782 Posts
    • 13,399 Thanks
    bod1467
    In my post "you" was intended to mean "total contributions" (personal plus company). Of course, lower salary = lower contributions to the pot. I don't think I said anything different?

    In a DB scheme, accrued benefits are ring-fenced. Whilst it is possible for salary to go down, ring-fenced benefits do not.

    It's a very complicated area - this is not the board for such a detailed discussion.
    Got a Parking Charge Notice (parking ticket - IT'S NOT A FINE!)? Go here for further info ...
    Main site > MoneySavingExpert.com Forums > Household & Travel > Motoring > Parking Tickets, Fines & Parking >
    ... and click on the NEWBIES sticky thread (4816822)
    Please do not PM me for help - I will not offer help via PM.
    • zagfles
    • By zagfles 22nd Sep 16, 7:32 PM
    • 10,994 Posts
    • 9,035 Thanks
    zagfles
    Usually employers would have a "notional" or "reference" salary before any sacrifice, which they'd use for stuff like overtime, employer pension contributions etc.

    But this isn't always the case so check your scheme.
    • Moto2
    • By Moto2 22nd Sep 16, 8:49 PM
    • 1,820 Posts
    • 1,478 Thanks
    Moto2
    Isn't there also some rule that prevents you doing it if - after the salary sacrifice - the remaining salary is below the minimum wage?
    Romanes eunt domus Romani ite domum
    • zagfles
    • By zagfles 22nd Sep 16, 8:55 PM
    • 10,994 Posts
    • 9,035 Thanks
    zagfles
    Isn't there also some rule that prevents you doing it if - after the salary sacrifice - the remaining salary is below the minimum wage?
    Originally posted by Moto2
    Yes.......
    • facade
    • By facade 22nd Sep 16, 11:47 PM
    • 2,056 Posts
    • 1,074 Thanks
    facade
    I wouldn't touch any Government backed "scheme" that would "save" me money with someone else's bargepole

    Salary sacrifice, cycle to work all the same, you won't ever beat "them"


    But maybe I am too old and cynical nowadays
    I want to go back to The Olden Days, when every single thing that I can think of was better.....

    (except air quality and Medical Science )
    • Shambler
    • By Shambler 23rd Sep 16, 10:47 AM
    • 739 Posts
    • 538 Thanks
    Shambler
    If you do go ahead with it remember to tell HMRC.

    I assumed my employer would do it but 2 years later found out that I should have had a cut to my tax code for them to reclaim the BIK...this was never explained.

    Now I'm having to pay back 3 years of BIK in one year.
    • bogues
    • By bogues 27th Sep 16, 7:03 PM
    • 3 Posts
    • 0 Thanks
    bogues
    Car salary sacrifice and tax credits
    Hi
    If your income is lower because of car salary saceifice can you then tell it to HMRC and be topped up by increased tax credits?
    • facade
    • By facade 28th Sep 16, 6:30 AM
    • 2,056 Posts
    • 1,074 Thanks
    facade
    Hi
    If your income is lower because of car salary saceifice can you then tell it to HMRC and be topped up by increased tax credits?
    Originally posted by bogues

    : rotfl:
    I want to go back to The Olden Days, when every single thing that I can think of was better.....

    (except air quality and Medical Science )
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