When it comes to Salary Sacrifice schemes, fleets and their drivers have experienced a lot of change in recent years.
It began, you may remember, with the Autumn Statement which Philip Hammond delivered towards the end of 2016. This document confirmed that the rules were changing for Optional Remuneration Arrangements – which includes cars taken through Salary Sacrifice, as well as cars chosen where a cash alternative is available. Instead of being treated and taxed as company cars, these vehicles would instead be treated and taxed as income.
A timeline of changes
These rule changes came into effect in April 2017. Since that date, cars taken through Salary Sacrifice (or instead of a cash alternative) have been subject to Income Tax (for the employee) and National Insurance (for the employer). Some vehicles were made exempt from this change, as our Q&A on the subject explains – including Ultra-Low Emission Vehicles (ULEVs), which are vehicles that emit 75g CO2/km or less.
‘Oversight’ in previous rules
This has been the state of play for the past two years, although now there is another change to account for. As of 6 April 2019, it isn’t just the cars that are taxed as income. Other elements that are packaged with the car – such as breakdown cover, maintenance and insurance – will be treated as taxable benefits, and therefore similarly subject to Income Tax and Employer’s National Insurance Contributions. The Government has introduced this measure, it says, to correct an ‘oversight’ in its previous version of the rules.
Changes for drivers
According to some estimates, this latest change could increase some driver’s tax bill from between £100 to £240 each year, although many drivers will not be impacted. It is worth remembering that Salary Sacrifice comes with other benefits, which means that it still deserves to be considered as part of a company’s offering to its employees.
Benefits of green cars
What are those other benefits? The first is the most obvious: the employee gains a new – and therefore greener – car, often at a more competitive price than they would secure otherwise. They then enjoy the convenience of having extra features, from maintenance to new tyres, included as part of their workplace’s company car policy. It also offers drivers an all-inclusive motoring package with fixed cost insurance, accident management and breakdown cover – among many other services – included. Even with the new tax changes, a Salary Sacrifice car could well be cheaper, overall, than one bought off the forecourt.
Our expert Consultancy Services Team are able to guide you through the shifting landscape of Optional Remuneration Arrangements and Salary Sacrifice schemes. Please get in touch if you would like more information.