How does the car leasing scheme work
Colleagues who access our car leasing scheme can obtain a new vehicle from NTW Solutions. Monthly payments are then taken through either salary deduction (after tax) or salary sacrifice (before tax). There are no credit checks or deposits – you select a length of lease and enter a contract.
A salary deductions would be taken from your monthly net pay (after tax), and will not impact on your pension nor any other benefits you might receive. Deductions don’t carry any HMRC restrictions on spending, where sacrifices do.
The sum of a salary deduction will be the monthly charge for the car you select in addition to the VAT, and would appear on your payslip each month. As your tax will also be increased when using a deduction for a company vehicle by the HMRC, NTW present the entire cost as ‘Monthly Net Cost’ in their quote breakdowns – this is the figure you can expect your take-home pay to be reduced by.
Salary Sacrifices are essentially an agreement from you to reduce your earnings in place of a non-cash benefit, in this case, a vehicle. Your monthly quote for the car is then deducted from your gross pay (before tax), effectively meaning you’re earning less.
The main benefit of a salary sacrifice is a reduction in tax, national insurance and pension contributions each month, because of your ‘reduced’ earnings. Because of this, salary sacrifices will impact your pension and it is advised that you seek advice from the NHS Business Service Authority to gain a better understanding of this.
For more information on the differences between deductions and sacrifices, visit NTW’s information page on the button below.