While purchasing an electric vehicle (EV) is typically more expensive than purchasing a diesel or petrol car, leasing an EV with a salary sacrifice scheme can be even more affordable than both of these options. The thought of getting a brand new Tesla for 50% less than the average monthly cost is very enticing, but how can a salary sacrifice scheme work for you?
How does a salary sacrifice scheme work?
A salary sacrifice is a scheme in which an employee foregoes a portion of their gross salary in exchange for a benefit. You may be familiar with other salary sacrifice in other contexts, such as pensions, bike to work or childcare schemes, where a portion of your salary will go to one of these benefits. With loveelectric, you can use a salary sacrifice scheme to assist you in obtaining an electric car for up to 50% less every month.
If you’d like to learn more about how the scheme works, we have a number of articles where we go more in-depth on how the scheme works, an insight on the tax benefits of a salary sacrifice scheme, as well as some of our most frequently asked questions.
Will I be eligible for a salary sacrifice scheme?
At loveelectric, our goal is to empower businesses of all sizes to go electric, by giving your employees access to premium cars for a more affordable price. However, our scheme won’t be suitable for every business. Our general guidelines for businesses who wish to sign up for our scheme are the following:
Quick Eligibility Check
- Your company has been trading for 2+ years
- Your company has not been the subject of insolvency proceedings or any Court Protection Order during the previous year period
- Your company is profitable or has a net worth of over £500k
- Your annual staff retention rate is above 85%
Although we unfortunately can’t be flexible on the first 2 points, if the latter 2 don’t apply to you, don’t let this put you off! The best way to find out whether you're eligible for our salary sacrifice programme is to contact us here and we'll see if your company is eligible.
In order to maximise the benefits of the scheme, the ideal candidate for a scheme like this is one that employs 50+ people and is VAT registered. But what if you don’t fit into that category? Below are some examples of different businesses to help you decide wether or nor a salary sacrifice is right for your business.
Company Director
If your company is looking to increase staff benefits and in turn your staff retention, the loveelectric salary sacrifice scheme could be a good fit for your business! To get the maximum benefits in terms of saving money, generally the sweet spot in terms of number of employees is having 20+ members of staff, as well as being VAT registered, as this will maximise your savings. (If you’d like to learn more about how VAT works in a salary sacrifice scheme, click here.)
However, as it's a salary sacrifice, a business hire might be better for your business. If you’d like to see an article comparing the two to get a better understanding of what the differences are between a business hire lease and leasing through a salary sacrifice, click here.
Schools & Charities
Schools and charities are typically not VAT registered, but what effect does that have if you want to sign up for a salary sacrifice scheme?
In a salary sacrifice scheme, employees save the VAT on their lease which their VAT registered employers can reclaim 50% oft. As schools and charities are not able to reclaim VAT, they won’t be able to extend this saving. However, you may wish to return your employer’s National Insurance savings in a cost neutral approach to you as the employer to subsidise the savings further for your employees and provide them the best possible price without being VAT registered.
Consultants
If you work as a consultant and you’re wondering if a salary sacrifice scheme is right for you, it may depend on how you’re paid.
If you pay yourself a minimum base salary and then through dividends on top of that, then a salary sacrifice scheme may not be the best option for you. This is because the portion of your salary deducted might limit your options or even make you ineligible if your remaining salary would take you below the minimum wage, so in cases like this, we recommend looking into a business hire instead.
Self-employed
If you’re self-employed and looking to get an electric car for a better price, a salary sacrifice might not be your best bet as you won’t be able to get these benefits for yourself. However, if you’re signed up to the scheme you could still offer this benefit to your employees if they’re interested in getting a brand new EV!
Start-Ups
If you’re an up-and-coming start-up, there may be some obstacles to signing up to our scheme. A general guideline is that you’ll need more than 2 years of trading, as without that our funders may deem your business to be too risky.
If you’re just below that threshold, unfortunately we can't make an exception if your business has less than 2 years trading, unless you have a parental guarantee from a parent company.
If you’re interested contact us here and we'll be able to determine whether loveelectric is a suitable fit for your company.
