Salary Sacrifice Advice

LemonMousePirate

I currently have a company car, PHEV, which is due for renewal later this year

I have a few options open to me on ways to go

1. stay on the company scheme as is
2. take an allowance of around £500pm and buy my own car
3. move to a EV salary sacrifice scheme and get an all inclusive EV deal

I am on around £65k pa gross with the current car attracting 14% BIK. If I was to take the £500pm allowance, I would be on around £72K pa gross, and would have to pay additional tax/NI on the £500pm allowance. 

If I go the EV route, and use the full £500pm as a sacrifice, I will only attract 3% BIK for year 1, then 1% each year up to 2029, so if I was to use up all the £500pm on the sacrifice and get an EV, would this lower my overall tax burden, as the BIK is much reduced, and the £500pm would be sacrificed and not subject to additional TAX/NI.

I am trying to end up slightly better off in terms of tax, still have a car, and it not affecting my take home in any way, possible even upping it. 

I have all the info from Octopus Energy, who my company has done a deal with, but the info they show, is rather confusing, as it shows Gross deductions, Net monthlies, tax & ni deductions, etc, rather than it being easy to understand, it appears more confusing and complicated to work out, so stopping me comitting to this EV SS route

eg. Car Audi Q4 e-tron 46 S Line
Gross Sacrifice £893
Estimated savings of £320 on Tax/NI, and inclusive of reduced 3% BIK
Giving a net sacrifice of £572

So, looking at this and my £500 contribution, am I better off or worse?

Exodi

So the three options are:

     1. stay on the company scheme as is
You have said what the BIK % is for your current vehicle but not the P11D value, so can't say how much it costs you (not that it's relevant as it appears you're intending to move from PHEV to EV, which I think is a great idea). To ensure we compare apples with apples, let's say you wanted to stay on the company scheme and contract hire a Audi Q4 e-tron 45 S Line 286PS Auto, which has a P11D value of £53,795.

You'd have a 3% charge this year, meaning the benefit kind in would be £1,614. As a higher rate tax payer, you'd lose 40% of this to the tax man (£645.60 a year, or £53.80 out of your pay packet). For theoretical purposes, your pay would be £65k+the BIK amount.

     2. take an allowance of around £500pm and buy my own car
This is rarely the best option but let's discuss it. As the £500p/m is gross, you'd pay tax and NI on this, meaning you'd only receive £290 in your pocket. With this you need to buy a decent car and get car insurance that covers business use. To get a Audi Q4 e-tron you're looking at a significant deposit (e.g. £4.5k) as well as committing to pay ~£600 per month for 4 years (just an example - other packages exist). Not only is this double what you receive in your pocket from car allowance, it's also a personal contract so you're stuck in it if you lose your job. It's also annoying for the employer, because they'd need to reimburse fuel at a higher rate than the typical AFR used for company vehicles. Usually I see car allowances taken where someone already owns a car that they want to keep using.

3. move to a EV salary sacrifice scheme and get an all inclusive EV deal
So your effective pay would be £72k - (893*12) = ~£61,284. Or another way to think about, as above you'd only receive around £290 in your pocket from your £500 car allowance and this option would take another £282 on top of this.

In the first scenario the company is paying the lease, whereas in the third you are. It's not hard to realise why it works out worse for you if you're paying the ~£600-900 monthly lease costs instead of them, or why you'd be worse off taking their offer of £500 a month and taking the least out yourself.

FWIW, it might not even be a fair comparison, as they may refuse to allow you to spend that much for a company hire vehicle.

(full disclosure: I've never personally had an EV salary sacrifice scheme vehicle, so I may have missed something here, I believe it includes insurance, but then so does the first option).

Putting my MSE hat on - I think (as you may have identified) by far the biggest savings will come just from moving from a PHEV to a pure EV - likely several hundred pounds a month in net savings due to the significantly lower BIK %. Make sure you don't make false comparisons between your company scheme (based on PHEV) and another scheme (based on an EV). Obviously the more expensive vehicles you look at, the more likely it appears better that the company pays the lease (aka option 1, if they allow it). The cheaper vehicles you look at will then start to shift the conclusion towards you taking on the lease.

HedgehogRulez

Take the £500 cash and put it in your pension.
buy a 2 year old car for £15k