Strategic Consultancy

Please take a look at our Capital Allowance guide or reach out to one of our team of specialists for more specific information.

Running a fleet salary sacrifice scheme offers tax-efficient benefits for both employers and employees, especially when the scheme includes ultra-low emission vehicles (ULEVs) like electric cars. Here’s a breakdown of the tax implications for employers and employees:

1. Tax Implications for Employees

• Benefit-in-Kind (BIK) Tax: When an employee chooses a company car via a salary sacrifice scheme, they pay Benefit-in-Kind (BIK) tax on the car’s taxable value, based on its P11D value and BIK rate. ULEVs (cars emitting less than 75g of CO₂ per km) have significantly lower BIK rates, especially for electric vehicles (EVs), making salary sacrifice particularly advantageous for employees choosing eco-friendly vehicles.
• Income Tax Savings: By reducing their gross salary in exchange for the car total taxable income is reduced, employees may even fall into a lower income tax bracket, resulting in reduced income tax liabilities. However, this depends on individual circumstances and the amount sacrificed.

2. Tax Implications for Employers

• National Insurance Contributions (NIC) Savings: Since the employee’s gross salary is reduced, the employer’s National Insurance Contributions (NIC) also decrease. Employers pay NIC on employees’ gross salary, so a salary reduction can create significant savings, particularly when multiple employees participate in the scheme.
• Class 1A NIC on BIK: Employers are liable to pay Class 1A National Insurance on the taxable benefit provided to employees through the scheme. For ULEVs, this cost is lower due to the lower BIK rate for these vehicles.

3. VAT Considerations

• VAT on Salary Sacrifice Cars: Employers are generally responsible for paying VAT on the car lease payments, but they can often reclaim part of the VAT if the car is used for business purposes.
• Employee VAT Contributions: If the employee contributes toward the cost of the car (for example, for private use), VAT may be applicable on these contributions, which the employer would need to collect and account for.

4. Additional Pay & Benefit Considerations

• Effect on Pension and Benefits: As salary sacrifice reduces the employee’s gross salary, it may affect contributions to salary-based benefits like pensions, bonuses, or redundancy payments. It’s essential for both employers and employees to be aware of these potential impacts.
• Advisory Fuel Rates (AFRs): For electric vehicles, the Advisory Electric Rate (AER) of 9p per mile (as of 2023) applies, allowing tax-free reimbursement to employees who use EVs for business travel.
• Minimum Wage Regulations: Employers must ensure employees are still paid at or above minimum wage even after the car salary sacrifice payment has been made.

5. Super-Deductions and Capital Allowances

• While employees receive the main tax benefits, employers can also benefit when purchasing vehicles rather than leasing them. For example, purchasing a ULEV allows businesses to qualify for enhanced capital allowances, like the Super-Deduction or First-Year Allowance (FYA), allowing them to write off the car’s value against taxable profits.

6. Other items to Consider

• Whilst salary sacrifice schemes can be a good employee benefit offering there are other factors to consider which should be addressed pre implementation to avoid unforeseen costs at a later date:
• What happens if the employee leaves?
• How does it interact with company car scheme for needs drivers?
• Are all costs rebilled to drivers? Fines, damage etc
• Are drivers benefitting from the best lease rates?
• How are you reimbursing business mileage?

Summary

A salary sacrifice scheme offers substantial tax benefits for both employers and employees, particularly when it includes ULEVs. Employers save on NIC, while employees benefit from reduced BIK rates and lower income tax implications for EVs, making it an attractive option. However, both parties should consider the effects on other salary-linked benefits and ensure compliance with VAT regulations. 

LetsTalkFleet can provide independent impartial advice on the most efficient Salary Sacrifice Scheme for your business so please get in touch with any specific enquiries you have, we are available on 0330 056 3335 or via email contact@letstalkfleet.co.uk .

The information provided is based on existing and proposed legislation as at November 2024 (30th October 2024 UK Government Autumn Statement). Whilst every effort has been made to ensure that information given is accurate and not misleading, this information is intended to provide a quick reference to the current tax regulations relating to company vehicles and how they impact employers and employees. The content has been provided for informational purposes only and should not be relied on as a substitute for professional advice. No responsibility can be accepted by LetsTalkFleet Ltd for any loss or liability occasioned by any person acting on or refraining from action as a result of viewing this information.

Depending on the type of vehicle and its usage this will vary, also the method by which your veicle is acquired will determine the VAT treatment. Our VAT tables provide a useful guide but for more specific information reach out and we we will be happy to help.

Recent changes have meant a potential increase in costs. Please take alook at our Vehicle Excise Duty table and reach out to us for more information.

There are recommended rates from HMRC which dictake the maximum values that can be paid to an employee for using their personal vehicle for business use, payments made above these values will incur a tax charge. We can look at this for you in more detail and help make sure that the amounts you reimburse are both fair to your employee and cost effective for your business.

The UK Government is still offering grants to incentivise the take up of low Co2 vehicles, these are dependant on meeting certain crieria and are limited in availability. Reach out and we can help identify grants that may be available to you.

This will depend on your specific circumstances, Corporation Tax, Income tax, VAT and National Insurance contributions for both the employer and employee are all areas that need to be taken into account. We are here to offer true independant analysis to ensure you have a clear and complete understanding.

Deciding between offering employees a cash allowance or a company car depends on company priorities, employee preferences, and cost-effectiveness. Here's a breakdown of some of the factors to help you guide the choice:

Advantages of a Company Car

1. Cost Savings for Employees: The company covers purchase, insurance, maintenance, and depreciation, allowing employees to avoid personal vehicle expenses.
2. Consistent Branding: Company cars give a uniform look and feel, especially beneficial for client-facing roles where brand perception is key.
3. Better Control Over Vehicle Quality: Ensures that employees drive well-maintained, safe, and possibly environmentally efficient vehicles, reflecting well on the company.

Downsides of a Company Car

1. Higher Direct Costs for the Company: You shoulder ongoing expenses, including insurance, repairs, and depreciation and whilst these can be mitigated you can still get "surprise" one-off costs.
2. Less Flexibility for Employees: Employees may feel limited by the car options provided, as they might prefer different models, sizes, or features or even already have access to a car at home.

Advantages of a Cash Allowance

1. Flexibility for Employees: Employees can choose their own vehicles or use the cash for something else, which can be a morale booster and a way to attract talent.
2. Lower Administrative Burden: Providing a cash allowance eliminates the need to manage vehicle purchases, maintenance, and repairs.
3. Cost Predictability: A fixed monthly allowance is easier to budget for compared to the variable costs associated with company cars.

Downsides of a Cash Allowance

1. Tax Implications: Cash allowances are often taxable for employees, which can reduce the net benefit and require careful communication.
2. Less Control Over Vehicle Standards: Without company-provided cars, you lose control over vehicle quality, which can impact brand perception and increase Corporate liability if employees drive subpar vehicles.
3. Obligations Don't Disappear: The company still has to ensure any vehicles used for business purposes are insured, maintained and are suitable for the job this becomes more difficult when they are not company vehicles.

Key Considerations

• Tax Efficiency: Some Company cars are often more tax-efficient in the UK due to lower Benefit-in-Kind (BIK) taxes, especially for Electric and other low-emission vehicles.
• Employee Preferences: Younger or urban employees may prefer the cash for flexibility, while those with longer commutes may appreciate the convenience and savings of a company car.
• Company Culture and Image: If brand visibility is essential, company cars help control that image. If autonomy and flexibility matter, cash allowances might better align with your culture.
• Financial Modelling: Policies should be developed using detailed financial modelling to ensure Fleet Total Cost of Ownership (TCO) is considered alsong with all aspects of taxation including income tax, national insurance, corporation tax and VAT for example.
• Tax & Regulatory Changes: Whatever the decision then it should be reviewed annually to ensure its still correct as the Fleet and Company car environment changes on a regular basis.

Final Thoughts

• Company Car: Best when brand control and employee convenience are priorities.
• Cash Allowance: Ideal when flexibility, employee choice, and lower administrative overhead are more important.

Ultimately, the "winner" depends on your company’s specific needs, but a hybrid model, offering employees a choice, is increasingly popular as it accommodates a diverse range of employee preferences.

LetsTalkFleet can provide independent impartial advice on the most efficient cash versus company car strategies for your business so please get in touch with any specific enquiries you have, we are available on 0330 056 3335 or via email contact@letstalkfleet.co.uk .

No, should be maybe, it's about the drivers who drive on business mileage but using their own cars. These need to managed by you as you still have a duty of care on these drivers.

That's why we are here, completely independent and as per our values passionate about fleet.

We have seen this many times and we know how this can work and why it sometimes does not. Let us have a look for you.

Outsourcing your fleet management services versus handling them in-house depends on factors like the size of your fleet, available resources, and strategic goals. Here are some considerations to help determine the best option for you:

Benefits of Sourcing Your Own Fleet Services

1. Greater Control: You maintain direct oversight over fleet operations, ensuring that decisions align closely with company goals and standards.
2. Cost Flexibility: You can potentially cut costs by choosing specific providers, negotiating directly, and avoiding the mark-ups of third-party managers.
3. Custom Solutions: In-house management allows you to tailor your services precisely, like specialized maintenance schedules or specific fuel management programs.

Downsides of Sourcing Your Own Fleet Services

1. Resource Intensity: Fleet management requires dedicated personnel, time, and expertise, which may not be cost-effective if you're managing a small fleet.
2. Complexity: Handling all logistics, from fuel tracking to maintenance scheduling, adds complexity and requires a skilled team.
3. Knowledge: You and your team will require up to date industry and technical knowledge to ensure operational efficiencies.

Benefits of Outsourcing Fleet Management

1. Access to Expertise: Fleet management companies specialize in this field, often bringing advanced knowledge, technology, and established vendor relationships.
2. Time and Resource Savings: Outsourcing can free up internal resources, allowing your team to focus on core business activities.
3. Scalability and Flexibility: Outsourced services can adapt to your fleet's needs more easily, particularly if your fleet grows or changes over time.

Downsides of Outsourcing Fleet Management

1. Reduced Control: While a third-party manager will handle most of the operations, you may have limited control over specific services or vendors.
2. Potential for Additional Costs: Outsourced services can sometimes add a layer of fees or mark-ups, which can add up depending on the contract and services provided.

Key Takeaways

• In-House: Best if you have a small to mid-sized fleet and want complete control over costs and operations.
• Outsourced: Ideal if you have a larger fleet or if managing fleet logistics in-house would stretch your resources.

The right choice depends on weighing these factors against your fleet’s needs and the resources your organization can realistically commit, LetsTalkFleet can provide independent impartial advice on Fleet Management so please get in touch with any specific enquiries you have.

This has changed and is constantly changing. We can look into your specific fleet and let you know.

To enhance your benefits package for employee retention and recruitment, especially with options like ECOS, Salary Sacrifice, and Affinity programs, consider structuring offerings that are both attractive and cost-effective. Here are some ways to improve these programs to support employee satisfaction and retention:

1. Employee Car Ownership Company Car (ECOS) Schemes: 

• No Benefit in Kind (BIK) Tax: Although cars are not technically ‘Company Cars’, schemes are normally structured to have exactly the same look and feel as a Company Car.
• Cost Savings: ECO schemes can deliver cost savings versus traditional company car schemes for cars without any Electric driving capability.
• HMRC Taxation Status: The UK Government is introducing legislation in 2025 to clamp down on schemes they see as "contrived" so care must be taken when implementing any ECO scheme.

2. Salary Sacrifice Program: Attractive Tax Savings and Flexibility

• Promote Tax Efficiency: Salary sacrifice allows employees to reduce taxable income in exchange for benefits like cars, bikes, and other lifestyle perks, making it financially attractive. Educate employees and HR about these tax-saving advantages.
• Car Offering: Salary sacrifice works well for Electric vehicles and can be used as a perk for non company car drivers but care must be taken around vehicle suitability especially if there is any business use.
• Broaden the Offerings: Expand the salary sacrifice program beyond cars to include other high-value benefits, such as pension contributions, bike-to-work schemes, and even mobile devices or home-office equipment.
• Flexible Terms: Offer flexible and customisable lease terms within the salary sacrifice options so employees can choose terms that best suit their budget and lifestyle, increasing accessibility and appeal.

3. Affinity Programs: Offer Unique Benefits Through Partnerships

• Exclusive Discounts: Negotiate affinity deals for your employees, such as discounts with popular automotive brands, insurance providers, or service centres. Partnerships with car brands for purchase discounts or special lease deals can boost the program’s appeal.
• Additional Lifestyle Perks: Include discounts for things like fuel, gym memberships, entertainment, or travel to make the affinity program a broader lifestyle benefit.
• Local and National Partnerships: Establish partnerships with local businesses (e.g. cafes, gyms, and health & wellness centres) alongside national brands to make the program feel personalized and community-focused.

4. Flexible Mobility Benefits: Support Different Employee Needs

• Monthly Allowance for Transport: Offer an allowance for employees to use towards public transit, rideshare, or bike rentals, which can appeal to employees who don’t need a car but want mobility support.
• Hybrid Car Leasing Options: Provide hybrid leasing that allows employees to swap or upgrade their cars at set intervals, meeting the needs of employees who may only need a car occasionally.
• Mobility Budgets for Younger Staff: For younger employees, consider a “mobility budget” that can be used across different transportation modes, promoting flexibility and reducing costs for non-driving employees.

5. Promote and Communicate the Program Benefits

• Onboarding Support: Educate new hires about the salary sacrifice, eco, and affinity programs, making sure they understand the financial and lifestyle advantages available.
• Engaging Resources: Create easy-to-understand guides or online tools (like cost calculators) to help employees visualize savings from salary sacrifice or eco options.
• Regular Updates and Open Enrolment Windows: Have regular communication about any changes or new additions to the package. Open enrolment periods encourage employees to consider joining the program.

6. Wellness and Financial Benefits: Combine with Other Employee Well-Being Perks

• Wellness Programs: Support the eco-car initiatives by offering wellness benefits, such as mental health days, wellness allowances, and fitness memberships, to promote a holistic well-being approach.
• Financial Counselling: Provide access to financial advisors who can help employees make informed choices about salary sacrifice and car benefits, reducing stress and increasing program satisfaction.

Summary

Improving your package to include a variety of eco, salary sacrifice, and affinity options provides employees with choice, flexibility, and tax advantages. Pairing these with wellness and financial perks can make the package even more competitive, appealing to a wide range of employee needs and helping you secure and retain talent effectively.

LetsTalkFleet can provide independent impartial advice on the most efficient Fleet Products for your business including Salary Sacrifice, ECO and Affinity Schemes so please get in touch with any specific enquiries you have, we are available on 0330 056 3335 or via email contact@letstalkfleet.co.uk .

This ia a question we get asked a lot. It all depends on a number of factors. We can have a look and let you know.

Good question. Over or under changes can all impact your costs. We have tools to monitor and forecast future costs and parameters.

Fleet funding models can be complex, we have an overview here Fleet Products - Lets Talk Fleet but I can break down the main types for you and highlight the pros and cons of each. Here are the common models:

1. Outright Purchase

• Description: The company buys vehicles outright, owning them completely.
• Pros: Full ownership, no finance costs, and flexibility to customize the fleet.
• Cons: High initial capital outlay, vehicles can depreciate quickly, and you bear the full burden of maintenance (which could be outsourced) and disposal.

2. Finance Lease

• Description: You lease the vehicle and make payments over an agreed period. At the end of the lease, you may have the option to buy the vehicle.
• Pros: Lower initial costs, monthly payments spread out, and lease payments are tax-deductible against Corporation tax.
• Cons: Maintenance and insurance are typically your responsibility, and you don't own the vehicle until the end of the lease.

3. Operating Lease (Business Contract Hire)

• Description: You lease the vehicle without the option to buy at the end. The leasing company retains ownership and manages maintenance.
• Pros: Lower monthly payments than a finance lease, minimal upfront costs, predictable budgeting, and no residual value risk.
• Cons: No ownership, long-term contract commitment, and restrictions on mileage and usage.

4. Hire Purchase (HP)

• Description: Similar to finance lease, but the vehicle is owned at the end of the term without any additional purchase fee.
• Pros: Simple ownership transfer, potential tax advantages, and payments can be spread out.
• Cons: Typically higher monthly payments than leasing, and you handle all maintenance costs.

5. Sale and Leaseback

• Description: Sell your existing fleet to a leasing company, then lease it back. This unlocks capital tied up in vehicles.
• Pros: Frees up cash, ideal for fleets already owned, and provides predictable costs for fleet operations.
• Cons: Often no ownership options, possible higher long-term costs due to leasing fees, and potential contract limitations.

6. Salary Sacrifice

• Description: Employees opt to receive a company vehicle in exchange for a reduction in their pre-tax salary. This model is tax-efficient in the UK.
• Pros: Tax savings for employees and cost-effective for employers; also promotes employee retention with attractive perks.
• Cons: Limited to certain vehicle types in some regions, often focused on lower-emission vehicles, and may require additional admin.

Key Takeaways

• Outright Purchase: High control and high upfront costs.
• Finance Lease: Low upfront, with option to own, but you cover maintenance.
• Operating Lease: Low maintenance hassle, predictable costs, but no ownership.
• Hire Purchase: Ownership at end without additional fees, but higher monthly payments.
• Sale and Leaseback: Great for cash flow but lacks ownership.
• Salary Sacrifice: Tax benefits and employee-friendly but limited to specific markets and vehicles.

Each model fits different priorities, like capital flexibility, vehicle control, tax strategy, and cash flow and LetsTalkFleet have financial models which factor in all these variables bespoke for your business' unique requirements.

LetsTalkFleet can provide independent impartial advice on the most efficient Fleet Products for your business Cash versus Company Car so please get in touch with any specific enquiries you have, we are available on 0330 056 3335 or via email contact@letstalkfleet.co.uk .

We have a great audit process to find this out, looking at the different costs you have and benchmarking with other companies.

Keeping drivers happy and productive while reducing costs is achievable with a mix of strategies focused on engagement, efficiency, employee and well-being. Here are some key areas to consider:

1. Vehicle Choice

• Suitable for purpose: Ensure the vehicle's the drivers are using are suitable for all their job and personal requirements including electric driving range.
• Driver Engagement: Offering some driver choice allows drivers to feel empowered and part of the selection process.
• Maintenance and replacement: Ensure vehicles are fully maintained, fit for use and replaced at optimal times. 

2. Optimise Schedules and Routes

• Efficient Routing: Use advanced route-planning software to optimise routes, reduce fuel consumption, and minimise time on the road. Shorter trips reduce driver fatigue and improve driver satisfaction.
• Flexible Scheduling: Offer predictable and flexible schedules when possible. Drivers value control over their time, so consider rotating shifts or scheduling around peak traffic times.

3. Incentivise Safe and Efficient Driving

• Reward Programs: Create incentives for fuel-efficient driving, safe driving behaviours, and high performance. This could include rewards for fewer accidents or meeting fuel-efficiency targets, which can also reduce costs on insurance and maintenance.
• Gamify Performance: Use telematics and apps to track driving behaviours like speed, braking, and idling. Gamifying these metrics with friendly competition and rewards can motivate drivers to improve.

4. Invest in Driver Comfort and Health

• Ergonomic Seats and Cab Upgrades: Comfortable cabs can reduce fatigue and improve morale. This is a cost-effective way to boost productivity by making the work environment more enjoyable.
• Health and Wellness Programs: Encourage wellness by offering resources for exercise, mental health support, and nutrition, which can reduce turnover and increase productivity.
• Regular Rest Breaks: Ensure schedules allow for adequate rest to prevent fatigue, reducing accident risk and promoting well-being.

5. Provide Driver Training and Licence Checking

• Ongoing Training: Invest in training programs to enhance driving skills and safety knowledge. This improves performance, safety, and job satisfaction while reducing accident-related costs.
• Licence Checking: Proactively monitor driver vehicle licence status to ensure any problem drivers are identified in advance and interventions can be made,

6. Leverage Technology for Real-Time Support

• GPS and Communication Tools: Provide real-time updates on traffic, weather, and road closures to reduce stress and improve punctuality.
• Telematics for Vehicle Monitoring: Use telematics to monitor vehicle health and prevent breakdowns. This can also alert drivers if they need to adjust their driving style to save fuel or amend driving behaviour.

7. Streamline Fleet Maintenance

• Preventive Maintenance: Regularly service vehicles to avoid breakdowns that cost time and money. A well-maintained fleet reduces downtime and unexpected delays for drivers.
• Encourage Driver Feedback: Allow drivers to report issues with their vehicles, which can prevent small problems from becoming costly repairs. It also shows drivers that their input is valued.

7. Encourage Open Communication and Feedback

• Regular Check-ins and Surveys: Allow drivers to voice their concerns and share feedback through one-on-one check-ins, surveys, or team meetings. Understanding their pain points helps improve satisfaction and gives you insights to cut costs.
• Suggestion Programs: Set up a system for drivers to share ideas on reducing costs and driving operational efficiencies. They’re often the first to spot inefficiencies that management might overlook.

8. Cost-Efficient Benefits and Perks

• Non-Monetary Benefits: Offer perks like free or discounted meals during long trips or reward programs for safe driving that are cost-effective but boost morale.
• Fuel and Maintenance Savings: Pass on some of the savings from reduced fuel costs or preventive maintenance programs to drivers in the form of small bonuses or other perks, making them feel part of the savings efforts.

Summary

To keep drivers happy while reducing costs, aim for a balanced strategy that leverages technology, focuses on safety and efficiency, provides career growth, and supports driver well-being. Happy, engaged drivers are often more productive, safer, and better at managing costs themselves, making it a win-win.

LetsTalkFleet can provide independent impartial advice on the best methods for keeping company car drivers happy please get in touch with any specific enquiries you have, we are available on 0330 056 3335 or via email contact@letstalkfleet.co.uk .

No, definitely not, there could be advantages at using different providers, let us have a look for you.

Using our expertise we can review. All services have features which you may need but with our knowledge we can quickly match this to what you really need.

Let us complete a quick audit and have a look, without the right data in the right format it is difficult to say.

Good question and we would know - let us have a look, review and benchmark and come back to you.

Outsourcing could be an option but maybe small steps to start. Let us have a look where we could help and save you time.

This is moving constantly and we see it in use everyday. We have the experience. Let us match your needs with what is available for the best fit.

There are lots of service providers, offering different services and potential value. We have the knowledge to save you time, so let us do this for you and more importantly do it independently.

There are a number of factors to think about, technical specification, health & safety, true whole life costs, employee preferences are just a few. Let us help you navigate through this complex decision process so that you have the optimum policy in place for your business needs.

This can be very complex, cash flow, personal and business tax, whole life costs are just some of the key elements to consider. Utilising our bespoke and highly spophisticated financial modelling tools we can help you understand how these factors vary by product and what is best for you.

Specific products have different employee Benefit in Kind impacts. We can model what the potential BIK impacts can be for your employee base dependent on your potential product selection and choice of vehicles. 

Dependent on your VAT status, funding product and business usage there are restrictions on the amount of VAT recoverable. We can model different products and their tax treatment so that you can make an informed decision on what really is best for your business.

Understanding your vehicle usage requiements is critical to effectively manageing your costs, wherther this relates to annual mileage or activities your vehicles will be used for. We can look at the options available to you and potential scenario planning.

We can look into this. You may have specific On or Off balance sheet requirements. please see below an important update that may impact your company.We can help you choose the right product and structure in conjunction with your finance team to deliver what you need.

IFRS 16 Update : For Publicly quoted firms that report to the International Financial Reporting Standards and the public sector

New lease accounting rules effective from 1 January 2019.

Needs change over time and we can look at what is best for you now and in the future. We can provide a number of options taking into account how your needs may change.

We can design a tailored fleet policy to cover all your specific needs, using the right funding platform to minimise your costs and meet your operatinal requirements.

This can be complex, but need not be. All vehicle financing products have specific corporation tax considerations so let us review your requirements and help you choose a financing method that will meet your specific needs.

What is your normal rate of return? Are you tying up cash in expensive vehicles? Is this the best way forward or should you be looking to re invest this into growing your business? We can look at the options for you and offer a true independent view.

This is something we can look at for you, benchmarking your costs versus your peers and competitors ensuring you get the right costs, right contract, and right service. 

Do you want to manage risk and reward of vehicle ownership yourself or have someone else manage this for you? We have a number of products that can meet both of these requirements.