1. What is Salary Sacrifice Car Scheme?

A salary sacrifice car scheme is an arrangement where an employee gives up part of their salary in exchange for a company car. This can result in tax and National Insurance savings for both the employee and employer.

2. How Does the Calculator Work?

The calculator uses the following formula:

Where:

• \( Gross\ Pay \) — Total annual salary before deductions
• \( Income\ Tax \) — Annual income tax amount
• \( National\ Insurance \) — Annual NI contributions
• \( Car\ Sacrifice \) — Annual salary amount sacrificed for the car
• \( BIK\ Tax \) — Benefit-in-Kind tax for the company car

Explanation: The calculation shows how taking a company car through salary sacrifice affects your take-home pay.

3. Importance of Salary Sacrifice Calculation

Details: Understanding the net pay impact helps employees decide if a salary sacrifice car scheme is financially beneficial for their situation.

4. Using the Calculator

Tips: Enter all values in GBP. You'll need to know your income tax, NI contributions, proposed car sacrifice amount, and the BIK tax for the vehicle.

5. Frequently Asked Questions (FAQ)

Q1: What are the benefits of salary sacrifice car schemes?
A: Potential tax and NI savings, fixed motoring costs, and often includes maintenance and insurance.

Q2: Are there any downsides to salary sacrifice?
A: May affect pension contributions, mortgage applications, and other salary-based benefits.

Q3: How is BIK tax calculated?
A: BIK is based on the car's P11D value, CO2 emissions, and your income tax band.

Q4: Can I opt out of a salary sacrifice scheme?
A: This depends on your employer's scheme rules, but most allow opt-out with notice.

Q5: Does salary sacrifice affect my pension?
A: It can, as pension contributions are typically based on your reduced salary. Check with your pension provider.