Leasing and mobility provider Alphabet, a subsidiary of the BMW Group, has launched a new digital salary sacrifice product, following rising demand for these schemes among corporate customers.
Developed with a different ‘trusted partner’ to its predecessor, the new offer operates from an online portal designed to help employees self-serve, generating quotes comparing tax savings and estimated running costs for multiple cars before they place an order. Employers can choose which vehicles are available and approve all orders before they are fulfilled.
Salary sacrifice extends some of the perks of company cars to employees who wouldn’t otherwise be eligible for one. It enables drivers to lease a new car through their employer, for up to four years, and pay for it from their pre-tax income. There is no deposit or credit checks, and monthly costs are fixed for the duration of the lease, including vehicle excise duty, maintenance and breakdown assistance.
Recent taxation changes have made these schemes an increasingly cost-effective way to drive plug-in hybrid and electric cars while encouraging more businesses to introduce them.
For models with CO2 emissions of 75g/km or less, employee income tax and employer National Insurance Contributions (NICs) are calculated based on the remaining salary after the lease cost has been deducted. The vehicle is then taxed as a company car, using a percentage of its list price according to its CO2 emissions.
For electric cars, this ‘taxable value’ is fixed at two per cent of the list price until April 2025, which means driver Benefit-in-Kind tax and employer Class 1A NICs are usually lower than they would be for the salary sacrificed.
Alphabet says businesses providing a BMW i4 eDrive40 through a salary sacrifice scheme could reduce their annual NIC bill by £1,164 compared to a cash allowance and personal lease for the same car, while an employee (40% income taxpayer) would save around £330 per month in tax.
In turn, the latest British Vehicle Rental and Leasing Association (BVRLA) Quarterly Leasing Report showed 78% of cars ordered through its members’ salary sacrifice products in the last quarter of 2021 were electric. That compares to a 31% electric share of the association’s total order take during the same period.
David Rose, head of product management at Alphabet (GB), said: “We remain committed to helping customers transition to ultra-low and zero emission fleets. The introduction of Alphabet Salary Sacrifice helps improve the accessibility of electric vehicles, creating more opportunities for our customers, and their employees, to gain the electric advantage.”