Benefit in Kind - salary sacrifice EV

AnakinSwalker

Hello

I'm wondering if when BiK is calculated on the above scheme, your pre-sacrifice salary is used? I know that you take the value of the benefit and then multiply it by the rate, which is currently 3% for EVs. Then you need to multiply it by your tax band (e.g. 40%). What I don't understand is how you decide which tax band. Is it your gross salary before the salary sacrifice amount for the car or after? Similarly, what about a salary sacrifice pension? Is this factored in or not? In my case, if both the EV sacrifice amount and the sacrificed pension contributions I make were deducted first, then my tax band would be 20% for the purpose of the BiK calculation, but it would be 40% if not. 

El_Torro

When you salary sacrifice then that money was never yours in the first place. For example if you have a gross salary of £5,000 a month and you sacrifice £1,000 into a pension and £1,000 into your electric car lease then as far as the tax man is concerned your gross salary is £3,000 a month, not £5,000. 

Based on this I would say that your Benefit in Kind is calculated at 20%, not 40%. 

AnakinSwalker

Hi El_Torro. Thanks for this. Yes, this was my thinking, but the indicative calculation I've been given my the EV scheme company seems to do what you say, but they don't seem to take my pension contributions off as well, which leaves me still in the 40% band. This is despite my having input my pension contributions into the calculator.

El_Torro

AnakinSwalker said:

Hi El_Torro. Thanks for this. Yes, this was my thinking, but the indicative calculation I've been given my the EV scheme company seems to do what you say, but they don't seem to take my pension contributions off as well, which leaves me still in the 40% band. This is despite my having input my pension contributions into the calculator.

I'm no expert on these matters but it seems to be an error on the part of whoever calculated it. Has the calculation come from your employer? If so I would query this. Seems an obvious error if they're taking your car lease sacrifice into account but not your pension sacrifice.