Source
r/UKPersonalFinance•
IanCal

Salary Sacrifice cars - lease only or purchase?

Hi all.

Electric cars now have an extremely good tax benefit coming from your company. Not as a loophole but explicitly created recently. If you're planning to lease a new car and are a higher rate taxpayer it can work out 42% cheaper.

Everything I can see about this covers leases, and I'm wondering if this is:

  • That's all that's legally possible
  • That's what I'm seeing in adverts as it's most common
  • That's most sensible because you can roll in insurance/servicing etc.

Is leasing all that's allowed? Or could (if offered) you buy a car outright with the same tax benefits? One on finance?

Some lease options it sounds like you can buy the car at the end - is this possible with the tax benefits? Sensible?

Anyone done this?

Posted Feb 17, 2021, 8:10 PM UTC

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[deleted]•

[removed]

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audigex108•

Even at 35p/kWh, though, it’s still around the same price as a reasonably efficient petrol car, or a little cheaper. And of the public chargers near me only one is 35p/kWh - the others are 30p, 22p, and free, while home is 6p or 14p depending on the time of day

If you only ever use expensive public chargers then you don’t save much on fuel costs, that’s true

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vms-crot15•

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audigex108•

Yeah, I think 35p/kWh is (in real terms) probably the limit we're likely to see, at least in general. Maybe in a few niche locations where they can get away with it, we'll see slightly more expensive chargers - if it's the only rapid charger for 50 miles in the Scottish highlands, they might try it on

The way I figure it, rapid charging is only for convenience anyway - motorway service stations etc - and that's always carried a premium. Motorway petrol is, what, 20p/litre more than you can usually find at the nearest supermarket?

As long as there are more reasonably priced chargers around generally, though, I think it's probably sustainable even for those without charging at home. 22p/kWh seems reasonable enough when I use a local 22kW charger (although I only get 11kW from it with my car's onboard AC charger, so perhaps it would seem more expensive if I was using it for more than just a top-up)

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phead4•

Ionity is 69p per kwh, and thats at major service stations. The government has failed totally in charging provisions, allowing the hopeless ecotricity to monopolise service stations for years, now allowing the this rip off company to fit them also.

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IanCalOP12•

Thanks!

At the end of the lease I'll have the option to buy the car outright or get a new lease

Interesting - do you know how that works? Is it just a private purchase at that point or also something possible with salary sacrifice?

BiK has been up then down then it's up again. It's still great but I think the unbelievable freebies are on their way out.

Yeah, I expect these will go as the cars become more common. I'm thinking of maybe getting one (as I will probably be getting a bigger car next year / next couple of years and tbh love some of the electric cars), and if there's a limited time I can save a great chunk it may be cheaper to get one now/next year than wait a few more.

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vms-crot15•

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IanCalOP12•

Ta, that's really helpful. They do seem like pretty good deals if you're after a new car - I guess this is part of the reason for pushing for adoption in a group of people that will buy new cars more regularly to help phase out petrol ones.

!Thanks for automod pointz

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vms-crot15•

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pflurklurk2996•

The reason leases are popular is that the company/employer purchases and the lease is a clear revenue expense - i.e. monthly payments immediately can be set off against profits.

A purchase or hire purchase ties up a lot of capital and brings in capital allowance considerations into play (although again, EVs have advantageous capital allowance treatment) so they are often not that favoured.

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IanCalOP12•

Ah but in this case I'm talking about the setup where the employee pays the full whack as the personal use means it's a benefit in kind. It's being sold much more as a perk and employee retention scheme rather than a more efficient company car.

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pflurklurk2996•

That’s a separate thing though - the employee pays tax on the benefit, and the benefit under the benefit code is assessed using the specific provisions for cars so based on value and rate (0%).

It doesn’t matter how the car is itself obtained by the company - they could have got it in a free prize draw.

It is just that many companies will prefer rental as it doesn’t tie up capital and they can get rid of the car easily (for instance if an employee leaves) and that their primary market: fleet buyers.

But if you’re a one man band the same things applies as to how you run your company, but many one man bands have inefficient capital use (which makes sense as it’s essentially quasi employment).

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IanCalOP12•

Thanks, reading between the lines it sounds like this requires the company to own the car/lease and the employee benefits from it. To take the extreme example, assuming the company supported it, I couldn't buy an electric car from my employer with salary sacrifice and own it outright.

But if you’re a one man band the same things applies as to how you run your company, but many one man bands have inefficient capital use (which makes sense as it’s essentially quasi employment).

Ah I was using "my company" as "my employer" - legally I know they're often the same thing, but here it's not a company I own.

!Thanks

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deadeyedjacks256•

Yes, for a VAT registered company an operating lease called business contract hire will be very tax efficient.

But as ownership remains with the lease company, there's no guaranteed option for the employee to buy at term end.

Is this for a company of which you are a controlling director?

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IanCalOP12•

I think you're talking about something else. I'm referring to this (trying to find good pages explaining things without pointing to companies, thought this was well known enough it wouldn't be shilling): https://www.tesla.com/en_GB/support/salary-sacrifice

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deadeyedjacks256•

That is literally a page about Business Contract Hire, as I outlined.

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IanCalOP12•

Then I'm either confused, because you and other pages on bch say you can't buy the car at the end but pages I find focussed on the salary sacrifice part tend to stress that you can - and there's someone in the thread who already had that option.

It sounded like a different thing, perhaps it's just different pages focussing on benefits to different people?

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deadeyedjacks256•

Most likely an Employee Car Ownership Scheme (Can also be done via Salary Sacrifice), but tax benefits to employer and employee not as good as an operating lease.

Whilst some lease companies might offer the employee the option to buy at lease end, the employer wouldn't be involved in that transaction and it's by no means assured.

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