Salary Sacrifice: Get A Tesla S And Save On Your Tax!
Yes, you heard me right ...
POSTED BY JONATHAN VOWLES ON 10/11/2015 @ 8:00AM
You've seen the car of your dreams and you want to get it a bit cheaper. Well now you can with the taxman's help! 'What?' I hear you say. No, the price doesn't alter, it's how you organise it that makes a difference ...
If you can get a salary sacrifice scheme started, you could be driving around in a Tesla S and saving on your tax bill at the same time!
If you are a director or an employee and you can choose your company car, or your company will agree to use a Salary Exchange scheme, then a green and tax-efficient vehicle like the Tesla S combined with a Salary Exchange/Salary Sacrifice scheme could be your answer.
"Salary Sacrifice is a well-known, tried and tested way of swapping some of your salary in exchange for your employer paying for something."
It doesn't generally work with cars because of the impact of company car taxation, however, the great thing about a Tesla is that it has a 5% rate of benefit-in-kind taxation. That is to say the individual will be taxed on 5% of the value of the car instead of the salary they have swapped.
HERE IS AN EXAMPLE FOR FINANCIAL YEAR 2015/16:
A base model Tesla S70 costs £54,600 (which includes a £5,000 government grant) and can be leased on a 24 month contract hire for around £7,000pa. A 40% taxpayer will pay £1,092pa in benefit-in-kind tax, but a 40% taxpayer who sacrifices £7,000pa in salary will save tax of £2,940pa - in other words the taxman will pay £1,848 towards your car!
The employer will also save tax. They will pay NIC on the benefit-in-kind of £377 but save tax of £966 on the salary sacrificed, a net saving of £589pa. If the employer is VAT registered and the car is leased, they will also be able to save half of the VAT paid - which would be around £700pa.
All of which means that the individual will save around upwards of £1,800pa in tax - result!
In the interests of fairness I should point out that there are other cars that have a 5% rate of benefit-in-kind taxation. The problem is that most of them aren't really in the same class. Either they are micro-cars, are very expensive, or they are all-electric but don't have a worthwhile range.
Let us know if you would like our help in organising your salary exchange. Call me on 01234 752 566, or click here to send me an email, and let's arrange a coffee and a chat to see how JVCA can help you.
Until next time ...
More about Jonathan Vowles ...
I've been an accountant in and for business since 1987 and have a wide experience of consultancy, audit, accounts, taxation and wealth planning work from individuals and small businesses to multinational corporations and charities.
My eclectic interests in growing and developing business span a number of areas, which can be summarised as strategic business advice and tax saving advice.
I have worked with the Chamber of Commerce to deliver courses for people about starting up in business and have lectured about tax for a major accountancy practice and for Milton Keynes College.
I relax by reading fiction and by getting away from the office in a campervan.