The next step in the company’s movement towards being more sustainable involved us wanting to be able to offer greater incentives to the Mosaac Team with regards to cleaner energy sources. As advisers, we are aware that we contribute a significant amount of carbon emissions due to the mileage that our advisers do over the year, so any way that we can incentivise advisers to reduce this is a benefit in our eyes!
We initially looked at launching an EV salary sacrifice scheme last year, but we needed a guinea pig who was willing to test it for us, and I drew the short straw. My existing lease didn’t finish until April 2022, so we decided to look at it closer to that time.
Unfortunately, we left it too long, as we didn’t account for the 6 month lead times on most new cars due to the computer chip shortage! So I was left with little option but to go for a Tesla Model Y (which I didn’t complain about!)
In case you aren’t aware of the benefits of the EV salary sacrifice scheme, here is a quick overview:
The company takes out the lease on behalf of the employee, and therefore pays the lease from the employee’s gross salary (ie. Before Tax and National Insurance)
This results in a much cheaper net cost to the employee for the lease.
Although this can be done on any vehicle lease, use of a company car is a “Taxable Benefit” (referred to as a “Benefit in Kind”)
However, on Electric Vehicles, the P11D value for calculating the tax rate is just 2% in the 2022/23 tax year, compared to up to 37% on high polluting vehicles! This makes the cost for using such a benefit extremely low by comparison.
I have now had my car for just over a month (as Tesla delivered early on their target date), and we’ve learned a lot about this scheme and how it works. In particular, it’s not all positives; here are some of the drawbacks that the scheme providers probably don’t tell you:
The employee will need to decide how to insure the vehicle. You can get Business Insurance and again opt for the company to pay for it from the gross salary, but Business Insurance is usually more expensive than getting personal insurance, and personal insurance is more difficult to obtain, as you will need to find an insurer that is willing to insure you for a car that you are not the Registered Keeper of (the Registered Keeper will either be your company or the lease company). This was probably the most difficult part for me, as there were very few providers that would offer this!
The car counts as a company vehicle (even though the employee pays for the insurance), so if you claim tax relief on mileage from HMRC, this is done on a much lower rate. For comparison:
The standard rate for your own car or a car you have leased personally is 45p for the first 10,000 business miles and 25p for each business mile after the threshold of 10,000 miles.
For electric company cars, the HMRC advisory fuel rate is just 4p per mile.
The car is a company lease, so if the employee leaves during the term, the company is still liable for the cost of the lease. This can be mitigated by taking out an additional insurance policy with the lease that will pay the termination fees if an employee leaves during the term, but this is an additional cost that the employee doesn’t incur if they simply take out a personal lease.
The lease companies ask for an “Initial Lease” of at least 1 month. What we didn’t realise was that they meant 1 month PLUS your first month, so the first month you end up paying a double hit, which threw all of our careful calculations out of the window straight away!
Overall though we’d rate the pilot of the scheme a success; the positives still outweigh the negatives, and I am happy with my lease. We’re really pleased that we’ve made one more step towards a cleaner company fleet, and we hope more of the team will be able to join me in the future!