Salary Sac EV leasing
Discussion
Trying to get ahead of the curve and understand stuff before my company adopts this offer via BigBenefits (Babcock).
My pension from this job is inconsequential to my retirement plans therefore i don't care about that aspect.
I dip my toe into the higher rate tax but only a couple of grand.
I read about tax implications when you stop leasing (from an NHS flyer i found online) due to pensions contributions but it made no sense to me and i think it is only talking about the "overall cost" with pension etc.
However, if you are a high earner – or will be, when you stop leasing – there are pitfalls. The gross salary sacrifice in this example is £8,253 –when you give the car back, your salary will go back up by £8,253. Assuming you have been in the 1995 pension scheme (you can find this out from your TRS or ‘annual benefit statement’) for 24 years, this would equate to 24/80th x £8,253 = £2,476 of pension ‘growth’. (This is not real pension growth, but getting your ‘old’ salary back.) The way pension ‘growth’ is calculated involves a factor of 19x (16x pension+lump). At 19x £2,476 this means £47,044 of pension ‘growth’ – which, if you’re over your annual allowance, is potentially £21,170 of annual allowance tax at 45%. Unlike salary sacrifice, that £21,170 bill is paid from post-tax income.
In summary: if you choose to lease and return the car, that would be a potential annual allowance tax liability of £21,170 or if over 36 months, an additional £588 per month to your net cost.
Just to confirm this above, it is only talking about missing out on pension contributions and that is the additional £588 per month?
OK assuming that is clear - the next question. Does the company scheme only usually involve a certain lease partner? I can see lots of compaines that offer SS lease but do you usually have free choice of company?
btw this will be personal, not business lease.
EDIT: lol just after i posted this i checked and it's gone live with NOVUNA, guess important Q has been answered.
My pension from this job is inconsequential to my retirement plans therefore i don't care about that aspect.
I dip my toe into the higher rate tax but only a couple of grand.
I read about tax implications when you stop leasing (from an NHS flyer i found online) due to pensions contributions but it made no sense to me and i think it is only talking about the "overall cost" with pension etc.
However, if you are a high earner – or will be, when you stop leasing – there are pitfalls. The gross salary sacrifice in this example is £8,253 –when you give the car back, your salary will go back up by £8,253. Assuming you have been in the 1995 pension scheme (you can find this out from your TRS or ‘annual benefit statement’) for 24 years, this would equate to 24/80th x £8,253 = £2,476 of pension ‘growth’. (This is not real pension growth, but getting your ‘old’ salary back.) The way pension ‘growth’ is calculated involves a factor of 19x (16x pension+lump). At 19x £2,476 this means £47,044 of pension ‘growth’ – which, if you’re over your annual allowance, is potentially £21,170 of annual allowance tax at 45%. Unlike salary sacrifice, that £21,170 bill is paid from post-tax income.
In summary: if you choose to lease and return the car, that would be a potential annual allowance tax liability of £21,170 or if over 36 months, an additional £588 per month to your net cost.
Just to confirm this above, it is only talking about missing out on pension contributions and that is the additional £588 per month?
OK assuming that is clear - the next question. Does the company scheme only usually involve a certain lease partner? I can see lots of compaines that offer SS lease but do you usually have free choice of company?
btw this will be personal, not business lease.
EDIT: lol just after i posted this i checked and it's gone live with NOVUNA, guess important Q has been answered.
Edited by TheDrownedApe on Thursday 9th June 14:30
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