Unlock Electric Car Savings with Salary Sacrifice

The cost of running a car, particularly with rising fuel prices and the increasing drive towards environmental sustainability, has become a significant consideration for many. For those looking to transition to an electric vehicle (EV), the initial outlay and ongoing costs can still seem daunting. However, a clever and increasingly popular solution is emerging, allowing employees to drive a brand-new electric car for considerably less than if they leased it privately. This is where the CVSL Electric Car Salary Sacrifice Scheme comes into play, offering a mutually beneficial arrangement for both employees and employers. Your employer is therefore delighted to be able to offer a range of zero-emission company cars via the CVSL Electric Car Salary Sacrifice Scheme (the “Scheme”). The following Frequently Asked Questions (“FAQs”) outline the benefits of participating in the Scheme and how it works.

What is a Salary Sacrifice Scheme?

At its core, a salary sacrifice scheme is an arrangement between an employer and an employee where the employee agrees to give up a portion of their salary in return for a non-cash benefit. In this instance, the benefit is a new electric car. This arrangement is a formal variation of your employment contract, and it’s important to understand that your gross salary will be reduced by the amount sacrificed. However, this reduction often leads to significant savings due to the way taxes and National Insurance contributions are calculated.

How Does the CVSL Electric Car Salary Sacrifice Scheme Work?

The CVSL Electric Car Salary Sacrifice Scheme allows you to lease a brand-new electric vehicle directly from the manufacturer or a chosen dealership. Instead of paying for the car out of your post-tax income, you agree to sacrifice a portion of your gross salary each month. This sacrificed amount is then used by your employer to cover the cost of your car lease, including insurance, maintenance, and breakdown cover, often bundled into a convenient all-inclusive monthly payment. Because the sacrifice is made before tax and National Insurance are calculated, you effectively pay less tax and National Insurance on your reduced salary. This is the primary mechanism through which the savings are realised.

What are the Key Benefits of Joining the Scheme?

Participating in the CVSL Electric Car Salary Sacrifice Scheme offers a multitude of advantages:

1. Significant Cost Savings:

This is arguably the most compelling benefit. By sacrificing salary before tax and National Insurance are applied, you reduce your taxable income. This means you pay less Income Tax and less National Insurance contributions. For many, the savings can amount to hundreds of pounds per year, making EV ownership much more affordable.

2. All-Inclusive Monthly Payments:

Typically, the monthly payment for your electric car under the scheme covers not just the lease of the vehicle but also essential running costs. This often includes comprehensive insurance, routine servicing and maintenance, MOT tests (where applicable), and 24/7 breakdown assistance. This simplifies budgeting and removes unexpected repair bills, offering true peace of mind.

3. Access to New Electric Vehicles:

The scheme provides access to the latest models of electric cars from a wide range of manufacturers. You can choose from various makes and models to suit your needs and preferences, ensuring you get a car you’ll love driving. This allows you to embrace the benefits of electric motoring, such as zero tailpipe emissions and a quiet, smooth driving experience.

4. Environmental Advantages:

By choosing an electric car, you are contributing to a cleaner environment. EVs produce zero tailpipe emissions, which helps to improve air quality in urban areas and reduce your carbon footprint. This aligns with growing personal and corporate commitments to sustainability.

5. Reduced Risk and Hassle:

Leasing through the scheme often means you are protected from the depreciation risk associated with car ownership. At the end of the contract, you simply hand the car back, with no need to worry about selling it or its residual value. This hassle-free approach makes it an attractive option for many.

How Does Salary Sacrifice Affect My Tax and National Insurance?

This is a crucial aspect of the scheme. When you sacrifice a portion of your gross salary, your taxable income is reduced. This means:

• Income Tax: You pay Income Tax on a lower amount of salary, resulting in a direct saving on your tax bill.
• National Insurance Contributions (NICs): Similarly, your NICs are calculated on your reduced gross salary, leading to further savings.

It is important to note that while your NICs are lower, this might have a minor impact on your entitlement to certain state benefits that are linked to National Insurance contributions. However, for most employees, the immediate financial savings outweigh this potential long-term consideration. The Benefit-in-Kind (BiK) tax on electric cars is currently very low, making them an exceptionally tax-efficient option compared to traditional petrol or diesel vehicles.

What is Included in the Monthly Payment?

The beauty of these schemes often lies in their comprehensive nature. A typical monthly payment under the CVSL Electric Car Salary Sacrifice Scheme will usually include:

This all-encompassing package simplifies car management and provides a predictable monthly expense.

What Electric Cars Can I Choose From?

The CVSL Electric Car Salary Sacrifice Scheme aims to provide a wide selection of electric vehicles to cater to diverse needs. You can typically choose from popular models such as:

• Tesla Model 3
• Nissan Leaf
• Hyundai Kona Electric
• Kia e-Niro
• Volkswagen ID.3
• MG ZS EV
• And many more!

The exact range will depend on the specific agreements CVSL has with manufacturers and dealerships. You will usually be presented with a catalogue or online portal to browse available models and configure your preferred vehicle.

What are the Eligibility Criteria?

Eligibility for the scheme is determined by your employer. Generally, you must:

• Be an employee of the participating company.
• Have a valid UK driving licence.
• Meet the employer's criteria for the scheme, which may include a minimum period of employment.
• Your salary must remain above the National Minimum Wage after the salary sacrifice has been deducted.

It’s essential to check with your HR department or the scheme administrator for the specific eligibility requirements.

What Happens at the End of the Agreement?

At the end of your salary sacrifice agreement, which is typically 2 or 3 years, you will usually have a few options:

• Return the Car: The most common option is to simply hand the car back to the leasing company.
• Extend the Agreement: You may have the option to extend your current agreement for a further term.
• Order a New Car: You can enter into a new salary sacrifice agreement for a different electric vehicle.
• Purchase the Car: In some cases, there might be an option to purchase the car, though this is less common with salary sacrifice schemes.

Your employer will provide clear guidance on the available options as your agreement nears its end.

Are There Any Potential Downsides?

While the scheme offers significant benefits, it's important to be aware of potential considerations:

• Reduced Take-Home Pay: Your net monthly pay will be lower due to the salary sacrifice.
• Impact on Benefits: As mentioned, a lower gross salary could potentially affect pension contributions (if calculated as a percentage of basic salary) and entitlement to certain state benefits.
• Early Termination: If you leave your employment or wish to exit the agreement early, there may be cancellation fees. These are usually substantial as the employer has committed to the lease.

It is crucial to carefully calculate your potential savings and consider your personal financial circumstances before committing.

Frequently Asked Questions (FAQs)

Q1: Can I choose any electric car?

A: The choice of vehicles will be from a pre-approved list provided by CVSL and their partners. You should consult the scheme's literature for the specific range of available models.

Q2: What if I exceed the mileage allowance?

A: Exceeding your agreed mileage allowance will typically result in excess mileage charges at the end of the contract. It’s vital to choose an allowance that accurately reflects your anticipated annual mileage.

Q3: Can I have a company car allowance instead?

A: The salary sacrifice scheme is a specific benefit. If your employer offers a car allowance, it would be a separate arrangement, and you would typically have to choose one or the other.

Q4: What happens if I leave my job?

A: If you leave your employment, you will likely need to exit the salary sacrifice agreement. This usually involves paying a termination fee to CVSL, which covers the costs of ending the lease early.

Q5: Is charging the car covered?

A: Typically, the cost of electricity to charge the car is not included in the monthly payment. This remains your responsibility, similar to how you would pay for fuel for a petrol or diesel car.

Conclusion

The CVSL Electric Car Salary Sacrifice Scheme presents a fantastic opportunity for employees to drive a new, zero-emission electric vehicle while making significant savings on their motoring costs and tax liabilities. By understanding how the scheme works and carefully considering your personal circumstances, you can make an informed decision about whether this is the right choice for you. It’s a modern, efficient, and environmentally conscious way to embrace electric mobility.