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Salary sacrifice is an arrangement where you agree to forgo part of your salary in return for receiving non-cash benefits, such as healthcare or childcare. The advantage of salary sacrifice is that it can help you reduce your taxable income and, as a result, increase your take-home pay.
However, there are some potential disadvantages to salary sacrifice that you should be aware of before agreeing to any arrangement. For one, salary sacrifice can reduce your future retirement income, as the amount of money you have available to contribute to a pension pot is reduced. Additionally, if you leave your job before the end of the salary sacrifice period, you may have to repay some of the benefits you have received.
Before agreeing to a salary sacrifice arrangement, it is important to consider all of the potential pros and cons to ensure that it is the right decision for you. Hence is salary sacrifice worth it? In this article, we will find out.
Employee Benefits – Is salary sacrifice worth it?
What is a salary sacrifice car scheme?
A salary sacrifice car scheme is a type of salary sacrifice arrangement where you agree to forgo part of your salary in return for the use of a company car.
The main advantage of this type of scheme is that it can help you save money on taxes and National Insurance contributions (NICs). For example, if you are a basic rate taxpayer, you could save up to £1,090 in taxes and NICs over the course of a year by sacrificing £5,000 of your salary.
Salary sacrifice for electric cars
A lot of people are turning to salary sacrifice schemes for getting electric cars. This means you get a right car for an affordable monthly amount. Having an electric car also saves you further money as you don’t have to pay for petrol and fuel.
Benefits of an Electric Vehicle?
Electric vehicles (EVs) are becoming increasingly popular, thanks in part to advances in technology that have made them more affordable and practical.
EVs offer a number of advantages over traditional petrol or diesel cars, including:
Low running costs: EVs are cheaper to run than petrol or diesel cars, as you only need to charge them up rather than buying/refilling fuel.
Zero emissions: EVs produce zero emissions, which is better for the environment and can also help you save money on road tax.
Government incentives: There are a number of government incentives available for EV owners, including the Plug-in Car Grant, which offers up to £3,500 towards the cost of a new EV.
Disadvantages of a salary sacrifice car scheme
There are a few potential disadvantages to be aware of before signing up for a salary sacrifice car scheme. For example, if you leave your job before the end of the contract, you may have to repay some or all of the benefits you have received. Additionally, salary sacrifice arrangements can reduce your future retirement income, as the amount of money you have available to contribute to a pension pot is reduced.
Conclusion
Before agreeing to any salary sacrifice arrangement, it is important to consider all of the potential pros and cons to ensure that it is the right decision for you.