WDB
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Post by WDB on Mar 31, 2023 8:57:41 GMT
This ought to be about the centre of my specialist-subject Venn diagram, as it concerns electric vehicles and nerdy taxation rules but I’m struggling to find any comprehensive information on it.
My situation, as I’ve not properly explained, is that I am between jobs because my specialist sales team was disbanded in December as a cost-cutting measure. The next offer has taken longer than I’d have liked to come along but I’m reasonably optimistic that it will — and I’ll still be financially ahead if it happens by July.
And when it does, several of the employers I’m talking to offer salary-sacrifice-based EV leasing schemes. Now, I understand leasing and I understand salary sacrifice. What I don’t get is BIK tax on a leased car paid for by me. I get that it’s based on marginal rate times 2 percent for an EV — but 2 percent of what, given that the lease is 58 percent funded by me? The only ‘FAQ’ answers I’ve found so far treat this the same as if the car were a company car funded entirely by the employer.
Where I’m trying to get to is whether to pay (and wait for) a new EV, or to find, say, £40,000 (less the value of the CLS) for a 2021 iPace and run it myself until I fancy something next-generation. My impression is that the supply of approved-used iPaces has shot up lately, and prices have come noticeably down.
So I need to understand the tax rules clearly. Then I need to secure the next job. You can wish me luck if you like. 🤠
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Post by Alanović on Mar 31, 2023 9:29:25 GMT
God luck indeed. As you would probably expect though I have absolutely no clue about the tax stuff, and reading all that just makes me want to put my favourite hat on and go down the pub.
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Post by EspadaIII on Mar 31, 2023 9:37:41 GMT
Surely if you fund the car entirely through the salary sacrifice scheme, even though the leasing is via your company, it is no longer a company car per se? Also I think that any electricity supplied to you by the company is free from any BIK at the moment, even for private use.
Obviously if you have to pay the 2% BIK it is on the list price of the car, so a £50,000 car adds £1,000 to your taxable earnings, which even as a top rate tax payer costs you only £450 (plus NIC I think). So not a huge figure even if you had to pay it and good value if the firm pays all your electricity for the car.
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Post by Alanović on Mar 31, 2023 9:39:42 GMT
Dubya - investigate water ingress issues in i-Paces , and JLR's willingness to sort the problems people have had.
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Post by Humph on Mar 31, 2023 9:43:23 GMT
Oh yes indeed WDB, the very best of luck to you!
It’s been a while since I looked into these things but, a website that I used to find useful was “Comcar”. A few sub menus to burrow into but nothing challenging even for the likes of me. Might be worth a try anyway.
Blimey, it comes to something when even the holy grail of IT jobs in the south east are wobbly.
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Post by Humph on Mar 31, 2023 10:01:36 GMT
Just a tangential thought, but, you mentioned before about getting your younger son through his driving test? Is there maybe a window of opportunity right now to bin off the Merc, replace it with a cheap learner friendly vehicle and use that as your car for now until you have a firm job offer?
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WDB
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Post by WDB on Mar 31, 2023 10:31:38 GMT
Blimey, it comes to something when even the holy grail of IT jobs in the south east are wobbly. That's not really how it seems to be. Occasional upheaval is an occupational hazard. This is my fourth spell of job hunting and I've narrowly avoided at least two more in the course of 34 years. It's a faff but it passes - or has passed each time previously! - and I've generally ended up in a better situation, financially or otherwise, than in the job I left. I was ready to leave this one as the management situation had become chaotic to the point where it was affecting my mental health, so to leave with a decent payoff is arguably a bonus. That said, the early part of this year, as the business world assessed the consequences of the Truss calamity and the dark clouds over the international financial situation have been less active than I would have liked. There are signs that that may be improving as fears of a long recesssion, erm, recede. Fingers remain crossed. Just a tangential thought, but, you mentioned before about getting your younger son through his driving test? Is there maybe a window of opportunity right now to bin off the Merc, replace it with a cheap learner friendly vehicle and use that as your car for now until you have a firm job offer? I don't think so. He'll learn in York in the early summer and we'll want the CLS for the July trip to Snowdonia. I'd rather fund extra time with an instructor than change cars twice.
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Post by Humph on Mar 31, 2023 12:17:44 GMT
Ok fair enough, once again, hope you find a suitable job soon.
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WDB
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Post by WDB on Mar 31, 2023 13:56:28 GMT
Thanks HumphSurely if you fund the car entirely through the salary sacrifice scheme, even though the leasing is via your company, it is no longer a company car per se? You'd think so, wouldn't you? But I imagine there's a taxable benefit in making the EV available out of pre-tax income. And here's the answer, which even HMRC keeps well hidden. cccfcalculator.hmrc.gov.uk/CCF0.aspxThe key phrase here is the catchy 'Optional Remuneration Arrangement', of which salary sacrifice is the most familiar example. The EV is not a company car but the reasoning seems to be that people understand the principles of taxing company cars, and this is similar enough for the same BIK principles to be applied. (This is different from, say, Cycle to Work, which also operates under salary sacrifice but has no BIK liability.) For a £60,000 EV funded through salary sacrifice, the BIK is therefore 2% x £60,000 or £1,200, then rising by one point a year from 2025. So in practical terms, where an employer might offer a cash car allowance, as my last two have, which is then subject to NI and income tax NI at the marginal rate, the employee can instead sacrifice a similar amount and pay no NI and only the income tax calculated from the EV chosen.
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Post by Alanović on Mar 31, 2023 14:01:52 GMT
*shoots self in face out of utter confusion and boredom*
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WDB
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Post by WDB on Mar 31, 2023 14:11:02 GMT
No, don't do that! It simply means that where an employer might once have given you £5000 as an allowance, of which you used to keep £2900 with which to fund a car, you now get to spend the full amount and pay only a few quid a month in tax, depending on how lavish your choice of car. I can live with that, now I understand it.
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Post by Alanović on Mar 31, 2023 14:15:17 GMT
Ok. I still struggle with that, but Ok. I'll put my weapon down. I am vanishingly unlikely to ever need to consider it, fortunately. Hope your job situation resolves itself and if you decide to go for an i-Pace, you find one without any fish swimming around in it.
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Rob
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Post by Rob on Mar 31, 2023 19:49:44 GMT
Surely BIK does not come into it - it's salary safrifice. So pre-tax/NI so a cost effective way to get a lease. Doesn't the NHS offer similar? I'd check the small print because the lease will no doubt be yours so if they got rid of you... who'd pay the remainder?
Not sure about EV's but there are very good lease to be had privately. Might be a better option.
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Rob
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Post by Rob on Mar 31, 2023 19:54:27 GMT
If you did have a company car though, any contribution to the monthly cost would usually be pre-tax/NI so it can make sense to pay up to get a more tax efficient car. I played that game a few times.
If I didn't take my car as an option, I'd have had about £6.5k pre-tax and of course tax code not hit with a company car via BIK. I still say be wary of a personal lease if it's salary sacrifice.
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WDB
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Post by WDB on Apr 1, 2023 6:31:51 GMT
Did you look up the Optional Remuneration Arrangement, Rob? It’s all explained there. It’s not a company car, but the benefit has to be assessed for tax somehow and the company car mechanism fits well enough, so that’s what HMRC uses.
But the lease is tied to continuing employment, so the schemes I’ve found described online have a break clause that returns the car to the lessor without further liability.
My thought is that if I didn’t already have the i3, this would be a good way to get one. I’ll do the sums when the time comes, but my suspicion is that there are easier ways to fund a big car.
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