Check salary sacrifice impact

author: FutureCar Staff    

Businesses that offer employees access to a company car through salary sacrifice are being advised to review the impact of changes announced in the Autumn Statement. Alongside the reduction in national insurance contributions (NICs), Chancellor Jeremy Hunt confirmed that the national living wage will increase by 9.8% to £11.44 per hour. This new rate will come into effect in April and will also be extended to 21 and 22-year-olds for the first time.

Consultancy and channels development manager at Alphabet GB, Caroline Sandall-Mansergh, explained that while the increase in the national living wage is a positive development, it is important to consider the impact on salary sacrifice schemes. As the national living wage rises, the threshold for eligibility for salary sacrifice also rises, potentially excluding lower-earning employees from the benefit. Sandall-Mansergh recommends that fleet managers review their existing schemes to ensure that employees' access to benefits, such as company vehicles, can be maintained without disruption.

Alfonso Martinez, UK managing director of Ald Automotive LeasePlan, also highlighted the impact of the Autumn Statement on salary sacrifice. He stated that the increase in the living wage and the reduction in national insurance contributions will be welcomed by households, but these changes unintentionally affect the salary sacrifice schemes that make electric vehicles more accessible. Salary sacrifice allows drivers to lease vehicles through their employer and pay for them with pre-tax income. However, the Chancellor's decision not to adjust class 1A rates means that employers will not see a reduction in their NICs, which could potentially be passed on to employees. Additionally, the increased living wage may make some employees ineligible for salary sacrifice schemes, as the vehicle payments would push them below the threshold.

Martinez emphasized the importance of the salary sacrifice system, which has enabled drivers to switch to cleaner vehicles. He urged the Chancellor to be cautious in order to not undermine the benefits of this system. According to the latest statistics from BVRLA, 91% of salary sacrifice deliveries are for electric vehicles.

For more information on the Autumn Statement, click here.

FutureCar Staff