With many more of us now actively trying to reduce our carbon footprint, more employers are working towards developing reward strategies that will help support employees in their net zero ambitions.
The government has previously announced that the sale of new petrol and diesel cars will be banned from 2030, and the production of electric and low emission vehicles is already changing the landscape of sales of new vehicles. Manufacturers have also invested in producing long range electric vehicles which are much more affordable, making these a real option for a family car.
Linking the increase in electric vehicles sales into employee benefits, is a way to provide attractive, ethical, and environmentally responsible benefits at a time when the need to attract and retain key talent, is a high priority for employers.
If, at the same time, the benefit is offered using a salary sacrifice arrangement, there are financial advantages to the employer and employee.
The savings arise because the provision of this benefit is taxed as a company car, and the benefit-in-kind (BIK) rates applicable to an electric company car are significantly lower than the equivalent treatment of cash remuneration. We also have some certainly on the tax treatment, as the BIK rates for electric vehicles have been set at 1% until April 2025, and will then increase by just 1% per annum until April 2028.
Providing an electric car with a monthly lease cost of £500 offered under salary sacrifice, would:
Usually, the lease cost is inclusive of costs such as servicing, maintenance, insurance cover, and road tax, so overall in real terms the actual savings for the employee are much higher – a welcome addition to the home finances.
Before you race ahead to sign up with a provider, there are additional considerations to think about in the planning phase, not just on the lease provision but also the impact on reimbursement of mileage costs and whether your provider supports provision of home charging units too. It is therefore essential that any employer looking to offer an electric vehicle benefit to its employees, considers fully the wider operational considerations.
An employer wishing to implement an electric car salary sacrifice arrangement needs to ensure the sacrifice is effective and also give consideration to understanding.
Finding the right provider is also a key consideration – understanding what support you will get and that this meets your needs, is also important.
Finally, employee communications are key! Communicating not only the financial benefits but also the environment benefits and how this is supporting your overall environmental strategy, can be a helpful way to engage your employees and deliver extra value from your benefit spend.
At Crowe, we have a multi-disciplinary team of specialists who can advise fully on all these areas. Our specialists have a proven track record helping a number of companies and organisations to implement these arrangements.
Please contact Glen Huxter or Sharon Gilkes if you would like further information.
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