As the world of employee benefits evolves, more and more businesses are seeking innovative ways to provide perks that benefit both their employees and the environment. One such benefit gaining popularity in the UK is the salary sacrifice scheme for cars—especially through the use of car subscription services. This combination of convenience, savings, and flexibility provides employees with an exciting opportunity to access a vehicle through their employer, often with additional perks like reduced tax liabilities and inclusive maintenance.
In this article, we’ll dive into how car subscriptions through salary sacrifice schemes work, highlight the providers offering these services (like Ezoo and Cocoon Vehicles), and explain why they’re a great benefit for employees looking to drive a car without the hassle of ownership.
What Is a Salary Sacrifice Scheme for Cars?
A salary sacrifice scheme is an arrangement where an employee agrees to give up part of their salary in exchange for a non-cash benefit, such as a company car. This is often used by employers to offer employees access to a vehicle in a tax-efficient way. With a salary sacrifice scheme, the cost of the vehicle and associated benefits (like insurance, maintenance, and road tax) is deducted from the employee’s salary before tax, reducing the overall taxable income.
When it comes to car subscriptions, salary sacrifice schemes allow employees to access a car through a flexible monthly subscription fee. This means the employee can enjoy the benefits of driving a new or high-quality vehicle without the long-term commitment and financial strain of traditional car ownership or leasing.
How Does a Car Subscription Work Under a Salary Sacrifice Scheme?
Car subscriptions under salary sacrifice schemes operate similarly to regular car subscriptions but with the added benefit of tax efficiency. Here’s how it typically works:
Choose a Vehicle:
Employees can select from a range of cars available through the scheme. These may include a variety of makes and models, from more affordable vehicles to high-end electric cars and hybrids.Salary Deduction:
Instead of paying for the car directly out of pocket, employees agree to have a portion of their pre-tax salary deducted each month to cover the subscription fee. This reduces their taxable income, which can lead to significant savings on both national insurance and income tax.Inclusive Benefits:
Just like standard car subscriptions, salary sacrifice schemes often include maintenance, insurance, road tax, and breakdown cover in the monthly fee. This makes budgeting much easier, as employees know exactly what they’ll pay each month, with no unexpected costs.Flexibility:
Car subscriptions typically offer more flexibility than traditional car leases. Employees can often change their vehicle or cancel their subscription after a certain period, making it ideal for those who need a car for a short time or want the option to switch vehicles as their needs change.No Upfront Costs:
Unlike buying a car or taking out a traditional lease, car subscriptions through salary sacrifice schemes usually do not require a large upfront payment. This makes it easier for employees to access a high-quality vehicle without breaking the bank.
Why Is Salary Sacrifice for Cars Beneficial?
There are several benefits to car subscriptions under salary sacrifice schemes for both employees and employers:
1. Tax Savings for Employees
One of the main advantages of salary sacrifice schemes is the tax savings. By sacrificing a portion of their salary, employees can reduce their taxable income, which can result in lower income tax and national insurance contributions. This means they can enjoy the benefits of driving a car while paying less tax overall.
2. All-Inclusive Monthly Payment
With a salary sacrifice scheme, employees don’t have to worry about the typical costs of car ownership, such as insurance, road tax, servicing, or repairs. These are all included in the monthly subscription fee, making it easier for employees to manage their finances.
3. Access to High-Quality Cars
Car subscriptions offer a wide selection of high-quality vehicles, from compact city cars to electric and hybrid vehicles. Through a salary sacrifice scheme, employees can access cars that may otherwise be too expensive, making it easier to drive a brand-new or premium vehicle without the high upfront costs of purchase or leasing.
4. Sustainability and Electric Vehicles
Many companies offering car subscription services through salary sacrifice schemes now include electric vehicles (EVs) and hybrids as part of their offering. This allows employees to drive environmentally friendly vehicles, which can contribute to the UK’s efforts to reduce emissions and promote sustainability.
5. Flexibility and Convenience
Unlike traditional car ownership, car subscriptions offer flexibility. Employees can change their car at the end of their contract or switch to a different model if their needs change. Whether it’s a compact car for city commuting or a larger SUV for a family holiday, employees can adjust their vehicle choice based on their lifestyle.
Who Offers Car Subscriptions Through Salary Sacrifice Schemes?
Two companies leading the charge in providing car subscription services through salary sacrifice schemes in the UK are Ezoo and Cocoon Vehicles. Here’s a closer look at what they offer:
Ezoo
Ezoo offers a unique salary sacrifice scheme that allows employees to drive a new car with an easy monthly payment plan. Their subscription service includes a wide range of vehicles, from compact cars to eco-friendly electric models. With Ezoo’s flexible terms, employees can enjoy the freedom of driving a car without the long-term commitment, while taking advantage of tax benefits through salary sacrifice.
Ezoo’s scheme includes:
A wide range of vehicles, including hybrids and electric cars.
Insurance, maintenance, and breakdown cover included.
No upfront payment and low monthly payments.
Flexibility to swap cars as needed.
Cocoon Vehicles
Cocoon Vehicles offers an innovative salary sacrifice car subscription model aimed at providing employees with a more sustainable, tax-efficient way to access vehicles. Specialising in electric and hybrid cars, Cocoon Vehicles helps companies implement salary sacrifice schemes that benefit both employees and the environment. By offering electric vehicles as part of their subscription service, Cocoon Vehicles is aligning with the UK’s push for greener transportation options.
Cocoon Vehicles’ scheme includes:
Access to electric and hybrid vehicles.
All-inclusive subscription fee covering insurance, maintenance, road tax, and breakdown cover.
A focus on sustainability and helping employees reduce their carbon footprint.
Flexible terms and easy management of the vehicle.
How to Implement a Salary Sacrifice Car Scheme for Your Business
If you’re an employer looking to offer car subscription services as part of your benefits package, here are the basic steps to get started:
Partner with a Provider:
Work with companies like Ezoo and Cocoon Vehicles to establish a salary sacrifice scheme for your employees. They will provide the vehicles and manage the subscriptions on your behalf.Communicate the Benefits:
Ensure your employees understand the tax benefits, the simplicity of the scheme, and the ability to access flexible, high-quality vehicles. Highlight the eco-friendly options available, especially if you’re offering electric cars.Set Clear Guidelines:
Establish the terms of the scheme, such as which employees are eligible, how the salary sacrifice is calculated, and the types of cars available.Monitor and Support:
Keep track of the scheme’s success, address any concerns from employees, and adjust the offering as necessary based on employee feedback and changes in tax policies.
Conclusion: The Future of Employee Benefits
Car subscriptions through salary sacrifice schemes are quickly becoming a desirable employee benefit. They combine the convenience of a car subscription with the tax efficiency of a salary sacrifice, making it easier for employees to access high-quality vehicles at a lower cost. With providers like Ezoo and Cocoon Vehicles leading the way, businesses can offer an attractive, flexible benefit that aligns with the UK’s push for greener, more sustainable transport options.
Whether you’re an employee looking for a tax-efficient way to drive a new car or an employer wanting to enhance your benefits package, car subscriptions through salary sacrifice schemes offer an innovative and eco-friendly solution.
