How to calculate work car phone lease cost

Evade

Hello. My work has offered employees a car lease scheme through Pivotal through salary sacrifice. Electric cars only. Nobody is being helpful in understanding the true cost to me per month, saying it depends on the I individual.

My assumption is based on this example eg salary £100,000, car lease £1000 p/m. Do I then simply remove £12000 from salary, work out the difference in take home pay, which is £550 pm or thereabouts? Or is there more to it?

Does the same apply if over £100,000 where the extra kicks in?

Anything else I need to consider?

 Thanks

DullGreyGuy

There is a little more to it...

You are getting a company car and therefore will be liable for BIK, electric cars are much lower that most other cars but the rate is rising. So for this financial year you'd pay your tax rate (40% in your case) on 2% of the vehicles official price. So if its a £50k car that'd be £400 a year of BIK tax to pay. If the rate goes up so will the tax.

Finally the other consideration... these types of salary sacrifice schemes normally come out of your gross salary before anything else and therefore your employers 5% pension contribution (or whatever they make) will be on your new lower £88k salary not the £100k.

Grumpy_chap

An EV through SS is often very attractive for a high earner, to the point of being a no-brainer.

Your work are correct, though, in saying that the cost varies for each individual.

An often overlooked consideration is any impact on pension.

As you are earning over £100k and need to submit a tax return, do you have an Accountant?  They may be best placed to give you specific advice.

Within this website, you may find that the Cutting Tax forum is more help as this is really a tax question rather than a motoring question.  Can you ask a Moderator for the thread to be moved?

Evade said:

Hello. My work has offered employees a car lease scheme through Pivotal through salary sacrifice. Electric cars only. Nobody is being helpful in understanding the true cost to me per month, saying it depends on the I individual.

My assumption is based on this example eg salary £100,000, car lease £1000 p/m. Do I then simply remove £12000 from salary, work out the difference in take home pay, which is £550 pm or thereabouts? Or is there more to it?

Does the same apply if over £100,000 where the extra kicks in?

Anything else I need to consider?

 Thanks

Car_54

DullGreyGuy said:

There is a little more to it...

You are getting a company car and therefore will be liable for BIK, electric cars are much lower that most other cars but the rate is rising. So for this financial year you'd pay your tax rate (40% in your case) on 2% of the vehicles official price. So if its a £50k car that'd be £400 a year of BIK tax to pay. If the rate goes up so will the tax.

Finally the other consideration... these types of salary sacrifice schemes normally come out of your gross salary before anything else and therefore your employers 5% pension contribution (or whatever they make) will be on your new lower £88k salary not the £100k.

The OP would be leasing the car in his personal capacity. It would not be a company car so no BIK.

Grumpy_chap

Car_54 said:

DullGreyGuy said:

There is a little more to it...

You are getting a company car and therefore will be liable for BIK, electric cars are much lower that most other cars but the rate is rising. So for this financial year you'd pay your tax rate (40% in your case) on 2% of the vehicles official price. So if its a £50k car that'd be £400 a year of BIK tax to pay. If the rate goes up so will the tax.

Finally the other consideration... these types of salary sacrifice schemes normally come out of your gross salary before anything else and therefore your employers 5% pension contribution (or whatever they make) will be on your new lower £88k salary not the £100k.

The OP would be leasing the car in his personal capacity. It would not be a company car so no BIK.

It would be a company car if through SS so BIK will apply.

DullGreyGuy

Car_54 said:

DullGreyGuy said:

There is a little more to it...

You are getting a company car and therefore will be liable for BIK, electric cars are much lower that most other cars but the rate is rising. So for this financial year you'd pay your tax rate (40% in your case) on 2% of the vehicles official price. So if its a £50k car that'd be £400 a year of BIK tax to pay. If the rate goes up so will the tax.

Finally the other consideration... these types of salary sacrifice schemes normally come out of your gross salary before anything else and therefore your employers 5% pension contribution (or whatever they make) will be on your new lower £88k salary not the £100k.

The OP would be leasing the car in his personal capacity. It would not be a company car so no BIK.

They say its taken from their gross salary and so its a company car not a personal lease. If it was taken from their net salary it'd be a totally different kettle of fish.

Money_Grabber13579

Car_54 said:

DullGreyGuy said:

There is a little more to it...

You are getting a company car and therefore will be liable for BIK, electric cars are much lower that most other cars but the rate is rising. So for this financial year you'd pay your tax rate (40% in your case) on 2% of the vehicles official price. So if its a £50k car that'd be £400 a year of BIK tax to pay. If the rate goes up so will the tax.

Finally the other consideration... these types of salary sacrifice schemes normally come out of your gross salary before anything else and therefore your employers 5% pension contribution (or whatever they make) will be on your new lower £88k salary not the £100k.

The OP would be leasing the car in his personal capacity. It would not be a company car so no BIK.

As others have said, it most definitely will attract BIK. Their employer is arranging for a car to be provided to them in exchange for having reduced their salary, so their remuneration goes from £100k gross salary to £88k gross salary plus car.

For the OP, also worth noting that £100k is the threshold where personal allowances start to be withdrawn but what I can’t remember is whether salary sacrificing below the £100k threshold would then reinstate these allowances.

DrEskimo

Grumpy_chap said:

An EV through SS is often very attractive for a high earner, to the point of being a no-brainer.

Your work are correct, though, in saying that the cost varies for each individual.

An often overlooked consideration is any impact on pension.

As you are earning over £100k and need to submit a tax return, do you have an Accountant?  They may be best placed to give you specific advice.

Within this website, you may find that the Cutting Tax forum is more help as this is really a tax question rather than a motoring question.  Can you ask a Moderator for the thread to be moved?

Evade said:

Hello. My work has offered employees a car lease scheme through Pivotal through salary sacrifice. Electric cars only. Nobody is being helpful in understanding the true cost to me per month, saying it depends on the I individual.

My assumption is based on this example eg salary £100,000, car lease £1000 p/m. Do I then simply remove £12000 from salary, work out the difference in take home pay, which is £550 pm or thereabouts? Or is there more to it?

Does the same apply if over £100,000 where the extra kicks in?

Anything else I need to consider?

 Thanks

Just wanted to highlight this as I am not sure I agree.

I am a high earner and to a point now where it affects my personal allowance, but even still I find the cost of an EV on a SS scheme to be prohibitively expensive. In my case, the cost of the leases themselves provided by the third company are at such a mark up, that the net cost ends up being on cheaper, but not enough to suddenly make leasing a new car very good value. Still talking around £7-8k a year.

Granted, it includes insurance, maintenance and servicing, but these are typically costs where the value seems large on the face of it, and in reality amount to not much.

Also if your pension is equally part of a SS scheme, I don't believe it is affected as it is all calculated from the same starting point. 

Bigphil1474

A salary sacrifice lease car is not a company car, so there is no benefit in kind - as per the NHS Fleet lease scheme at least. The lease is between the leasing company and the employee, not the employer. The employer has merely arranged for a leasing company to offer services to it's employees.

I've looked at the NHS fleet lease and although on the face of it, it is a good deal, the lower mileage payments make it uneconomical for me. 

There will be an affect to your pension, as above, because the amount of pension contributions you and the employer may make  will be on the gross salary after the lease cost, not before it. 

I've decided against a lease car for now, cos I just can't see the benefit other than having a no hassle new car to drive round in, and the less obvious costs are difficult to calculate.

DullGreyGuy

Bigphil1474 said:

A salary sacrifice lease car is not a company car, so there is no benefit in kind - as per the NHS Fleet lease scheme at least. The lease is between the leasing company and the employee, not the employer. The employer has merely arranged for a leasing company to offer services to it's employees.

I've looked at the NHS fleet lease and although on the face of it, it is a good deal, the lower mileage payments make it uneconomical for me. 

There will be an affect to your pension, as above, because the amount of pension contributions you and the employer may make  will be on the gross salary after the lease cost, not before it. 

I've decided against a lease car for now, cos I just can't see the benefit other than having a no hassle new car to drive round in, and the less obvious costs are difficult to calculate.

So you think you get £12k (in the OP's example) totally tax free?

According to www.nhsfleetsolutions.co.uk/faqs/ which I assume is what you are talking about you will pay BIK

Grumpy_chap

Bigphil1474 said:

A salary sacrifice lease car is not a company car, so there is no benefit in kind 

That is incorrect.

The individual sacrifices some salary (so avoiding tax and NI on that sum) in return for which the employer provides the individual with a company car (which will be subject to appropriate BIK).  The car is likely an EV and so the BIK is low.

There is very often an impact on pension contributions / benefits as the sacrificed salary is no longer considered pensionable.

As I said above, this thread would be better in the Cutting Tax forum than Motoring.