Reducing Adjusted Net Income through using Octopus EV Scheme

SamwantstoreduceANI

I'm trying understand if I can reduce my net adjusted income (the figure that needs to be below £100,000), by leasing a car through a workplace salary sacrifice scheme with Octopus EV.

Currently I've worked my net adjusted income for the current tax year will look like:

+ £80,500 Salary

+ £17500 Annual Bonus

+ £9000 worth of shares through Performance Share scheme

+ £1500 employer paid benefits

= £108,500 TOTAL INCOME

- £6500 Salary sacrifice pension contributions

= £102,000 CURRENT ADJUSTED NET INCOME - A gap of £2001 to deal with.

I know I could top up my pension further but I am in need of a car so this could kill 2 birds with one stone.

Through my workplace, I can utilise a salary sacrifice scheme with Octopus EV.

For example if i opted for a Tesla model Y at a list price of £41,000

I'd pay £830 a month as salary sacrifice - pre tax, this includes lease of car, servicing and maintenance as well as insurance.

I'd pay £291 less tax a month (£331 income tax + £17 NI - £56 Benefit in Kind Tax)

The Benefit in Kind Value would add £1640 to my 'Total Income' bringing the value up to £110,140.

With the total payments = £9960, would this further reduce my Adjusted Net Income below £100,000 and therefore still make me eligible for 30 funded childcare hours?

Woodstok2000

If your adjusted net income is £102k, and you reduce it by £9960, that will be below the £100k threshold.

cc123mm456

You need to be very careful when calculating the future benefit in kind taxable amount for a "company car" (which will apply for a salary sacrifice arrangement).

The taxable percentage applied to the car list price this year will increase next April for tax year 2027/2028 and again in each subsequent tax year.

This link includes a table of future tax rates: https://www.fleetnews.co.uk/fleet-faq/benefit-in-kind/

Based on the example list price of £41,000 using the rates for an electric car:

2026/27 the taxable BIK amount is 4% = £1,640
2027/28 the taxable BIK amount is 5% = £2,050
2028/29 the taxable BIK amount is 7% = £2,870
2029/30 the taxable BIK amount is 9% = £3,690

This needs to be factored in to your calculations. You may or may not decide that it's still beneficial to take the deal on offer.

My feeling is that you would not achieve the stated aim, to reduce the salary sufficiently to be eligible for the funded childcare hours with just this salary sacrifice. You would probably need to use other measures as well, for example additional pension contributions. That is probably worthwhile anyway.