The UK is making it more affordable for its constituents to purchase electric vehicles (EVs). Starting April, EVs will be cheaper than cars equipped with internal combustion engines (ICEs), thanks to the implementation of a ‘salary sacrifice scheme’ initiated by the British Government. Salary sacrifice is when an employee agrees to exchange a percentage of his salary to get extra benefits from his employer, which in this case, is an electric car that’s partially funded by the company in a roundabout kind of way.
With the scheme implemented, EV buyers in the UK could save a total combined savings of GBP 320 (approx. PHP 21.4k) in income tax, Benefit in Kind and National Insurance every single month by leasing or buying a brand-new battery electric vehicle.
Through the salary sacrifice scheme, EVs become cheaper than both gasoline and diesel cars because of the way the scheme has been arranged to help EV owners save on National Insurance (NI) contributions and taxes, as well as the British Government’s introduction of 0-percent Benefit in Kind for the fiscal year 2020/21.
This gives EV drivers the chance to save GBP 220 (PHP 14.7k) on average per month when they file their tax returns for the 2019/2020 fiscal year when compared to retail purchase. Not only that, they are also entitled to great savings amounting to GBP 100 (PHP 6.7k) per month on income tax and NI.
That amounts to aforementioned total combined savings.
But that’s the British Government’s method. In reality, both public and private entities can implement a salary sacrifice scheme, and for companies who tout their sustainability efforts covering every aspect of their operations, perhaps it’s time for them to do their part in helping their employees live sustainably as well—that is, to help make the purchase of an EV more affordable through the implementation of company-customized salary sacrifice incentive.
The idea behind it is pretty simple—an employee surrenders part of his salary for a non-cash benefit. The take home pay is lower, which automatically lowers your taxes. For your employer’s part, they no longer have to pay the government your monthly contributions. Your employer may then pass some or all of these savings to you.
Of course, there are things to consider before a company can offer salary sacrifice to their employees. The most important consideration of all—the local government must be onboard with waiving taxes for both you and your employer. That’s because salary sacrifice schemes only work for both you and your employer if the benefits involved are tax-free.
It may seem like wishful thinking for the Philippine Government to apply such a measure, but as the automotive world moves forward with electrification endeavors, perhaps we may yet see it happen in this lifetime.