Fully electric zero-emission company cars under a salary sacrifice scheme can be very attractive.
Who is it for?
Employees can benefit across all salary ranges, but especially for higher rate taxpayers, in particular the benefits are highest for employees earning from £100,000 to £125,000 per annum. Earnings in this range have an effective marginal tax rate of around 60% because of the loss of personal allowance.
Employers also benefit as capital allowances may be claimed on the full cost of the car, net of VAT, in the year of purchase if structured properly.
And, of course, with more people moving towards zero-emission cars the environment is also benefitting.
How does it work?
Under a salary sacrifice scheme, employees will give up part of their salary in return for the use of a company car. Where the effective rate of tax is 60%, then they are just giving up 40% of their salary. There is however, a benefit in kind for the use of the company car, but for 2021/22 the benefit in kind tax rate is just 1% of the list price of the car, rising to 2% in 2022/23 for zero-emission cars.
What you should do next?
Please do get in touch to discuss this further with us.
Critchleys Clients: If you have specific questions, please contact your Critchleys contact directly.
First Published 24 September 2021
Last Updated 24 September 2021
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