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Focus

Some employers offer company cars through ‘salary sacrifice’. It means employees, some of whom might not have had access to company cars before, fund a company car through their salary.

Although they are giving up part of their salary to pay for the car, they stand to make significant savings through tax and national insurance contributions because it is funded through the gross salary, before tax.

The benefit to the employer is that the employee funds the car, however, if the employee chooses a low emission car, the benefit-in-kind tax burden could be substantially lower than the tax paid on the salary.

Employees choosing a car under salary sacrifice will most likely be subject to a CO2 emissions cap, purely because salary sacrifice is most cost effective on a car in a low benefit-in-kind tax band.

If you are offered the chance to choose a car under salary sacrifice, it could give you access to a new car at a much-reduced rate compared to buying your own or using a company provided cash allowance.

The downside is the car is provided as part of your employment, so if you were to leave the company, you would have to give up the car.

The attraction for employers is it can attract staff taking a cash allowance into a safety compliant company car scheme, and offer a form of company car without increasing costs significantly.

 

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