Car tax changes 2020: How can motorists secure benefit in kind rate savings?

The added tax on company cars has been completely cut from 16 percent to zero which will bring costs into line with petrol and diesel prices. Benefit in kind rates are all set to rise to one percent next year and two percent by 2022 so prospective buyers are set to make major savings. However, the benefit in kind savings are only available through company car salary sacrifice schemes. 


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What is a salary sacrifice scheme? 

In a salary sacrifice scheme an employee loses a portion of their salary in exchange for savings on tax and National Insurance. 

Salary sacrifice schemes will lead to massive NI and corporation tax savings for motorists. 

According to the RAC, leasing from an employer can often be much cheaper than purchasing a car from a dealer. 

This will mean motorists can get a better car for their money or save some pennies for future use. 

Most salary sacrifice schemes also include extras such as road tax policies, car insurance, breakdown cover and servicing. 

This makes many of these cars an ideal option for busy motorists who do not have time to deal with day-to-day running issues. 

How to purchase a car with discounted benefit in kind rates?

Prospective buyers should speak to their employees to see whether they offer a vehicle salary sacrifice scheme.  

Information on a scheme could be available through a staff benefits portal or staff emails and magazines. 

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Once they have signed up for the scheme, buyers will be given a list of vehicles they may be able to purchase. 

Money will then be deducted from a pay packet on a month-by-month basis to pay for vehicle costs. 

A recent study found eight out of ten business employees would be likely to get a company car due to the benefit in kind charges. 

Just three percent of road users said they were unlikely to take up a company car despite the new changes. 


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More businesses are likely to sign up for salary sacrifice schemes for their business as demand dramatically increases. 

Fiona Howarth, CEO of Octopus Electric Vehicles confirmed there had been a rise in demand for the schemes. 

She said: “We’ve already seen a huge surge in demand for salary sacrifice schemes, and employees at those companies are snapping up the electric car build slots with the manufacturers, as they try to get their car asap to make the most of the low tax rate.”

How much money can be saved?

As benefit in kind rates have been completely scrapped from 16 percent to zero, motorists are set to make heavy savings. 

Experts have previously estimated some of the UK’s most popular electric cars could be available for just a couple of hundred pounds. 

The new Tesla Model 3 could be available for just £307 per month if the car is bought under a 48 month contract in savings of over £200. 

City runarounds such as the Renault ZOE could also be available for just £284 per month with Volvo’s XC40 hybrid set for a £160 per month price tag. 

Poppy Welch, Head of industry campaigners Go Ultra Low said motorists would also be able to make savings on running costs. 

She said: “These changes will complement the existing benefits of driving electric, including lower running costs, a quieter, smoother drive and the flexibility of charging from home.”

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