EV car scheme

IAKing27

Hi, I have recently entered into an EV car scheme in an attempt to reduce my overall salary to below 100k to avoid the 60% effective rate of tax. 

In my payslips however, my gross income remains the same (top half) and they have just added a deduction entitled "Electric car" in the same section as tax and NI deductions. The impact of this is a same gross salary and increased deductions whereas i would expect a lower gross salary and less deductions (as a result of the lower gross).

Will this cause an issue with my P60 when trying to go below 100k, or is this simply a matter of presentation and will feed through correctly into the P60 come April?

Thanks in advance

MattMattMattUK

IAKing27 said:

Hi, I have recently entered into an EV car scheme in an attempt to reduce my overall salary to below 100k to avoid the 60% effective rate of tax. 

In my payslips however, my gross income remains the same (top half) and they have just added a deduction entitled "Electric car" in the same section as tax and NI deductions. The impact of this is a same gross salary and increased deductions whereas i would expect a lower gross salary and less deductions (as a result of the lower gross).

Will this cause an issue with my P60 when trying to go below 100k, or is this simply a matter of presentation and will feed through correctly into the P60 come April?

Thanks in advance

It entirely depends on the nature of the scheme, but it is highly unlikely to do what you think it is going to do, the car is still a taxable benefit. 

The only way for you to really get below the threshold is to increase pension contributions. 

IAKing27

MattMattMattUK said:

IAKing27 said:

Hi, I have recently entered into an EV car scheme in an attempt to reduce my overall salary to below 100k to avoid the 60% effective rate of tax. 

In my payslips however, my gross income remains the same (top half) and they have just added a deduction entitled "Electric car" in the same section as tax and NI deductions. The impact of this is a same gross salary and increased deductions whereas i would expect a lower gross salary and less deductions (as a result of the lower gross).

Will this cause an issue with my P60 when trying to go below 100k, or is this simply a matter of presentation and will feed through correctly into the P60 come April?

Thanks in advance

It entirely depends on the nature of the scheme, but it is highly unlikely to do what you think it is going to do, the car is still a taxable benefit. 

The only way for you to really get below the threshold is to increase pension contributions. 

Thanks for the response. My understanding of a salary sacrifice scheme, is that it should reduce your salary, hence the term salary sacrifice. In this instance, salary is not being sacrificed, but remaining the same, and deductions are being increased.

Could have got this completely wrong, but it does make logical sense to me that my salary should be reduced, rather than deductions increased, although appreciate they have the same impact in terms of net pay transferred to my bank account.

MattMattMattUK

IAKing27 said:

MattMattMattUK said:

IAKing27 said:

Hi, I have recently entered into an EV car scheme in an attempt to reduce my overall salary to below 100k to avoid the 60% effective rate of tax. 

In my payslips however, my gross income remains the same (top half) and they have just added a deduction entitled "Electric car" in the same section as tax and NI deductions. The impact of this is a same gross salary and increased deductions whereas i would expect a lower gross salary and less deductions (as a result of the lower gross).

Will this cause an issue with my P60 when trying to go below 100k, or is this simply a matter of presentation and will feed through correctly into the P60 come April?

Thanks in advance

It entirely depends on the nature of the scheme, but it is highly unlikely to do what you think it is going to do, the car is still a taxable benefit. 

The only way for you to really get below the threshold is to increase pension contributions. 

Thanks for the response. My understanding of a salary sacrifice scheme, is that it should reduce your salary, hence the term salary sacrifice. In this instance, salary is not being sacrificed, but remaining the same, and deductions are being increased.

Could have got this completely wrong, but it does make logical sense to me that my salary should be reduced, rather than deductions increased, although appreciate they have the same impact in terms of net pay transferred to my bank account.

That depends, is the scheme actually a designated salary sacrifice scheme, have you signed documents reducing your salary? Also remember that it would still be a benefit in kind, so taxable and needing a P11D to report and then pay tax on said benefit. 

Penguin_

They haven't set this up properly.

The sacrifice should show as a negative line under your salary which then combined with your salary gives you your taxable income.

IAKing27

Penguin_ said:

They haven't set this up properly.

The sacrifice should show as a negative line under your salary which then combined with your salary gives you your taxable income.

Thank you, this confirms my understanding. I am awaiting response from the payroll team who hopefully agree. If not, I will probably be back in this group seeking more advice!

Thanks all.

penners324

Have the tax and ni you're paying reduced? If so everything is fine.

penners324

Is there also a line for the extra tax you should pay on the benefit? There will be is your company are payrolling benefits (which mandatory from April 2026)

norsefox

As others have said, everything else remaining equal your month-to-month changes (or not) in PAYE and NI will tell you whether the reduction/deduction is being taken correctly, or as expected/intended.

I wouldn't rely on the gross salary amount being reduced (or not) as an indicator.  Our payslips have a gross salary value that never changes; with EV scheme, pension, cycle scheme, and re-payment deductions all included in the same area of the payslip despite some being taken from net pay, and others from gross pay.

Payroll teams are also entirely fallible.  We had a Finance Manager paying cycle scheme contributions out of net pay for 9 months, with neither payroll nor the FM noticing it was wrongly setup.