The scheme gives you the choice to pay by salary sacrifice or salary deduction to suit your lifestyle.
Salary sacrifice reduces your gross pay (before stoppages) for the period of the lease contract. This means you pay less Income Tax, National Insurance and Pension contributions on your lower gross pay. The allowance for business mileage including fuel is paid on submission of a monthly mileage return.
Salary Deduction means you pay a fixed amount from your pay after stoppages. The cost of the car is reduced by a business mileage allowance based on your estimated annual mileage and you will be paid fuel for your business journeys.
Each method has advantages; Car benefit tax is applicable to both methods, but it is lower for salary deduction because you can offset the charge for the car against tax.
The full car benefit applies to salary sacrifice but this is offset by the income tax reduction. In addition, you will save National Insurance and Pension contributions.
Salary sacrifice allows you to join the scheme with low or no business mileage and the payroll savings will mean that it is the cheapest method for most people.
