A business will buy IT or other equipment and will claim capital allowances on the expenditure against tax, thus reducing the effective cost. For an individual however, replacing his ageing PC or Mac (or indeed any other IT products such as iPads, printers, routers etc) at home has to be funded from “after tax” income. That is unless a “salary sacrifice” scheme is offered by the employer. Salary sacrifice involves giving up part of the gross salary in exchange for a payment towards the equipment. Employees don’t technically buy the equipment, but have it loaned to them by the Employer over the 3 year period. This approach is a legal requirement for this type of salary benefit. An example – buying a laptop. If the employee reduces salary by £45.11 per month, there would be tax and NI savings of £9.02 per month. Over a 3 year contract this equates to savings of £324.72. The overall rates are savings of around 20% for a basic rate taxpayer and 18% for a higher rate taxpayer. There are also NI savings for the employer too. But it is not just PCs that this applies to. Salary sacrifice can be used for other products too, such as childcare vouchers, bikes, phones and even cars! The car scheme can be a valuable addition to the reward packages for many organisations. By giving up part of their salary, the employee pays less tax and national insurance and the business also has an NI saving. There is a benefit in kind charge on the employee and a class 1A national insurance charge for the employer. However, with low emission cars, this class 1A charge will be far less than the NI on the salary sacrificed. The savings made will depend on the tax rate of the employee and the earnings on which NI is being paid. These car schemes have, until recently, been only available for quite substantial organisations. However a new website has been launched which makes all these benefits (including cars) available to the small business (either a limited company or a partnership with at least 4 partners), and indeed we have made it available to our own staff. One of them has opted to go down this route for a car and the wheels are in motion (no pun intended) to put this in place with delivery scheduled for early next year. There is a small monthly subscription payable to avail yourself of this service. However, the partners providing the benefits provide all of the necessary paperwork to ensure the salary sacrifice is correctly drawn up and documented. If you would like more details please contact us.
Posted on: Sat, 30 Nov 2013 18:00:01 +0000
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