CHB entitlement with electric vehicle salary sacrifice

kevinjfrodsham

Hello All,

My company has just launched an EV salary sacrifice scheme, but I can't figure out if it will be a good deal for us, but we do need a new car. I'm a bit of a biff regarding finances, and "gross, net, grossed-up" goes straight over my head. I am trying to find out if in my situation I would be liable to repay less CHB.

My wife only earns £8K but I earn more:

Salary - £50k
Bonus - 10%
Company car BIK - £5K

So on paper, I earn £60K and we repay back all our CHB (three children so £2500). 

The EV scheme says for a Renault Zoe, my pay will be reduced by £380 per month. Now in my head, I think that I need to take 40% (tax) of that £380 making it £228 but subtract the CHB I wouldn't have to repay also, to get a true reflection of how much this car will cost us. 

Hope this makes some sense and I would appreciate any help offered.

Grumpy_chap

kevinjfrodsham said:

Hello All,

My company has just launched an EV salary sacrifice scheme, but I can't figure out if it will be a good deal for us, but we do need a new car. I'm a bit of a biff regarding finances, and "gross, net, grossed-up" goes straight over my head. I am trying to find out if in my situation I would be liable to repay less CHB.

My wife only earns £8K but I earn more:

Salary - £50k
Bonus - 10%
Company car BIK - £5K

So on paper, I earn £60K and we repay back all our CHB (three children so £2500). 

The EV scheme says for a Renault Zoe, my pay will be reduced by £380 per month. Now in my head, I think that I need to take 40% (tax) of that £380 making it £228 but subtract the CHB I wouldn't have to repay also, to get a true reflection of how much this car will cost us. 

Hope this makes some sense and I would appreciate any help offered.

I am finding it a little hard to understand the post with regard to current and future position. 
The OP starts by saying there is a new EV salary sacrifice scheme and they do need a new car, but then later refers to Company Car BIK £5k. 
BIK for an EV company car is low (2% presently). 
Does the £5k BIK refer to a current company car that will be given up?
Will the SS EV be in addition to an existing company car?  (I don't think this is very common.)

What pension contributions does the OP make (employee contributions) and the OP's employer contributions?

With the figures presented, there is clear benefit for the OP to look to manage ANI for tax to <£50k so as to secure CHB plus it may also be possible to qualify for Marriage Allowance.

kevinjfrodsham

Grumpy_chap said:

kevinjfrodsham said:

Hello All,

My company has just launched an EV salary sacrifice scheme, but I can't figure out if it will be a good deal for us, but we do need a new car. I'm a bit of a biff regarding finances, and "gross, net, grossed-up" goes straight over my head. I am trying to find out if in my situation I would be liable to repay less CHB.

My wife only earns £8K but I earn more:

Salary - £50k
Bonus - 10%
Company car BIK - £5K

So on paper, I earn £60K and we repay back all our CHB (three children so £2500). 

The EV scheme says for a Renault Zoe, my pay will be reduced by £380 per month. Now in my head, I think that I need to take 40% (tax) of that £380 making it £228 but subtract the CHB I wouldn't have to repay also, to get a true reflection of how much this car will cost us. 

Hope this makes some sense and I would appreciate any help offered.

I am finding it a little hard to understand the post with regard to current and future position. 
The OP starts by saying there is a new EV salary sacrifice scheme and they do need a new car, but then later refers to Company Car BIK £5k. 
BIK for an EV company car is low (2% presently). 
Does the £5k BIK refer to a current company car that will be given up?
Will the SS EV be in addition to an existing company car?  (I don't think this is very common.)

What pension contributions does the OP make (employee contributions) and the OP's employer contributions?

With the figures presented, there is clear benefit for the OP to look to manage ANI for tax to <£50k so as to secure CHB plus it may also be possible to qualify for Marriage Allowance.

Hi grumpy-chap, thanks for the reply.

Apologies I could of probably have made it clearer.

So I have a phev as a company car where the BIK is 13% (3years remaining on lease), but my wife has just passed her driving and needs a car so this is why we are looking at this scheme. 


My pension contributions are 10% and my employer matches this. Which I had completely forgotten about before when trying to do maths. Does the employer contribution make a difference?

Thanks

Grumpy_chap

The employer pension contributions don't really change anything.
Is the 10% pension only on the base salary (£50k)?  Or is that also paid on the bonus and / or value of car?
Is your pension contribution paid via salary sacrifice?
Is the pension defined benefit (final salary) or defined contribution?

Do the EV scheme rules allow you to have that in addition to the company car?
When the company car comes up for renewal, will you then be able to have two electric cars?  One company EV plus one SS EV?

kevinjfrodsham

🤯
So from what I have found out today. My pension is on all earnings except the car.

The pension is salary sacrifice and is defined contribution.

I am allowed the SS EV benefit in addition to the company car.

Is my logic regarding deducting the tax from the figure of £380 (SS Lease) and not being liable to repay CHB on the SS  correct?

Thanks again

Grumpy_chap

Thanks for updating.

If I have understood this correctly, your current position is as follows:

• Salary £50k
• Bonus 10% = £5k
• Sub-total = £55k
• Employee's pension contribution 10% = £5.5k (deduction via SS)
• Sub-total = £49.5k
• Company Car BIK = £5k
• Total = £54.5k

As I understand it, that would mean you would not lose all of the child benefit through the taper at present.

For the future position, you would SS £380 / month = £4,560 per year.
You will gain an EV to use
The EV will give rise to BIK, a £30k EV at 2% BIK liability (at present) is a £600k tax code impact
(£120 actual tax at 20%, £240 actual tax at 40%)

I am making an assumption about where the company will treat the SS car.  This might impact the pension calculation.  I assume as follows:

• Salary £50k
• Bonus 10% = £5k
• EV SS = £4.5k (deduction via SS)
• Sub-total = £50.5k
• Employee's pension contribution 10% = £5k (deduction via SS)
• Sub-total = £45.5k
• Company Car BIK = £5k
• EV Car BIK = £0.5k
• Total = £51k

If the employer lines things up differently, it makes a little difference to the end outcome.

It is also important to note in the above, your (employee) pension contribution has also reduced a little.  That may mean you also lose the same amount from the employer's pension contribution.

Rather than end up with a figure at £51k, it may be worth exploring whether your employer would allow you to SS more into the pension, to bring your total taxable income (Adjusted Nett Income - ANI) down a bit further. 
Say you were able to make additional £1.1k pension contributions, resulting in ANI £49.9k, this would mean:

• No loss of child benefit through the taper
• Eligible for Marriage Allowance tax code adjustment £1,260 (tax saving £252 per year)

There are details around the rules for eligibility for Marriage Allowance, but I believe you would satisfy those based on what you have stated in the thread.  Similar caution with regard to avoiding the child benefit taper (HICBIC). Check the details in both cases.

Will your employer also match the extra pension contributions if you made them?

There are assumptions and rounding in the above, in particular about the value (hence BIK for the EV) and also the order the employer will cascade the EV SS into the overall calculation.  I hope the above helps and allows you to confirm the assumptions and apply actual figures rather than any approximations within the thread.

Dazed_and_C0nfused

There are details around the rules for eligibility for Marriage Allowance, but I believe you would satisfy those based on what you have stated in the thread.

Assuming all the basics are met then there are two factors which will be relevant here,

1).  You mustn't be liable to higher rate tax 
2).  If not liable to higher rate tax you also mustn't be liable to higher rate tax if the dividend nil rate (aka Dividend Allowance) was ignored.

kevinjfrodsham

Grumpy_chap said:

Thanks for updating.

If I have understood this correctly, your current position is as follows:

• Salary £50k
• Bonus 10% = £5k
• Sub-total = £55k
• Employee's pension contribution 10% = £5.5k (deduction via SS)
• Sub-total = £49.5k
• Company Car BIK = £5k
• Total = £54.5k

As I understand it, that would mean you would not lose all of the child benefit through the taper at present.

For the future position, you would SS £380 / month = £4,560 per year.
You will gain an EV to use
The EV will give rise to BIK, a £30k EV at 2% BIK liability (at present) is a £600k tax code impact
(£120 actual tax at 20%, £240 actual tax at 40%)

I am making an assumption about where the company will treat the SS car.  This might impact the pension calculation.  I assume as follows:

• Salary £50k
• Bonus 10% = £5k
• EV SS = £4.5k (deduction via SS)
• Sub-total = £50.5k
• Employee's pension contribution 10% = £5k (deduction via SS)
• Sub-total = £45.5k
• Company Car BIK = £5k
• EV Car BIK = £0.5k
• Total = £51k

If the employer lines things up differently, it makes a little difference to the end outcome.

It is also important to note in the above, your (employee) pension contribution has also reduced a little.  That may mean you also lose the same amount from the employer's pension contribution.

Rather than end up with a figure at £51k, it may be worth exploring whether your employer would allow you to SS more into the pension, to bring your total taxable income (Adjusted Nett Income - ANI) down a bit further. 
Say you were able to make additional £1.1k pension contributions, resulting in ANI £49.9k, this would mean:

• No loss of child benefit through the taper
• Eligible for Marriage Allowance tax code adjustment £1,260 (tax saving £252 per year)

There are details around the rules for eligibility for Marriage Allowance, but I believe you would satisfy those based on what you have stated in the thread.  Similar caution with regard to avoiding the child benefit taper (HICBIC). Check the details in both cases.

Will your employer also match the extra pension contributions if you made them?

There are assumptions and rounding in the above, in particular about the value (hence BIK for the EV) and also the order the employer will cascade the EV SS into the overall calculation.  I hope the above helps and allows you to confirm the assumptions and apply actual figures rather than any approximations within the thread.

Thank you very much for breaking that down for me, really appreciate the help