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Salary sacrifice EVs can help staff tackle cost of living crisis

There is a misconception that salary sacrifice car schemes are for the more highly paid employees who are paying tax at 40%, but in reality, the ones they really benefit are ones at the lower end of the pay scale paying tax at 20%, as you cannot allow a salary sacrifice to take net pay below the minimum living wage
andrew leech latest
Andrew Leech

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14 June 2022

 

AS  prices at Britain forecourts hit £2 per litre for petrol and diesel for the first time in history and the cost of living crisis gets ever deeper, there has never been a better time to consider switching staff into an electric car provided under a salary sacrifice scheme.

Andrew Leech, Managing Director and founder EV salary sacrifice and fleet management specialist, Fleet Evolution, who argues that for businesses and staff that want to keep mobility costs under control at a time of rapidly spiralling costs, a salary sacrifice car scheme can provide even relatively low paid staff with a far more cost and tax efficient vehicle.

He said: “There is a misconception that salary sacrifice car schemes are for the more highly paid employees who are paying tax at 40%, but in reality, the ones they really benefit are ones at the lower end of the pay scale paying tax at 20%, as you cannot allow a salary sacrifice to take net pay below the minimum living wage.”

To demonstrate how the running costs of a salary sacrifice electric car compare with those of a conventional ICE engine model, Leech cited figures from the Government car cost calculator website www.moneyhelper.org.uken/everyday-money/buying-and-running-a-car/car-costs-calculator

These show that for an average family sized car, like a five-year-old Vauxhall Astra 1.4T 16v 150bp SRi 5dr, the total annual running cost over a typical 10,000 miles is £8,070 a year or around £675 a month, including depreciation, fuel, SMR and insurance.

 

Make and model Vauxhall Astra 1.4T 16v 150 SRI 5dr
Mileage per annum 10,000
Total annual running cost £8,070
Annual fuel cost £,1483
SMR costs £1,077
Car tax £135
Annual insurance cost £600
Fuel consumption 51.4mpg
Estimated car value £,9850
Estimated depreciation cost £4,775

 

This vehicle would probably not have business use but would largely be used for commuting and social, domestic and pleasure purposes.

Leech said: “However, by having a comparable electric car under a company-provided salary sacrifice scheme, such as a VW ID3 Life Pro, a typical 20% tax payer would incur a lease rental cost of £322 per month to travel the same 10,000 miles, with recharging at home typically costing around £50 a month – that’s around half of what they’d pay in running their own car,” said Leech.

This monthly salary sacrifice lease rental would include all servicing, maintenance and repair, road fund licence and insurance costs, making it far most cost-efficient for lower-paid employees.

“For staff in lower pay brackets, this saves a significant proportion of their monthly take-home salary at a time when living costs are coming under unprecedented pressure. At the same time, they will also be making a major contribution to reducing their company’s carbon footprint.

“For employers, from an ethical viewpoint, going down an EV salary sacrifice route shows them in a positive light in trying to help their employees manage their living costs at a time of price rises across the board and in just about every area of society,” he added.

 

 

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Chris Wright

Chris Wright

Chris Wright has been covering the automotive industry nationally and internationally for 30 years. Following spells with consumer titles he became News Editor of Automotive Management (AM), Editor of Automotive International, International Editor for Detroit-based Automotive News, and Editor of Dealer Update. He has also co-authored several FT Management Reports and contributes regularly to Justauto.com

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