For many people the end of the tax year may seem like a lot of fuss over nothing, or something that’s important to a business owner or the self-employed but not to the regular full-time employee earning a regular wage. They know who the taxman is, but they rarely have any personal contact, so the April 5^th tax year deadline is something that comes and goes without much interest. But the Government has made a number of tax alterations in the last 12 months, and so anyone with savings or investments should be ready to exploit the impending deadline in 2023.

And even if they haven’t got significant savings or investments, a regular employee stands to be affected greatly by the new tax year, so as an employer you have a duty to help and advise where you can, particularly given the cost of living crisis we are all currently living through. But equally, the importance of promoting schemes where tax savings can be made – such as a salary sacrifice car scheme – also becomes a bigger priority.

What tax changes are coming into effect in April 2023?

From midnight on April 5^th 2023 a number of new tax rules will be introduced. The capital gains tax allowance will be slashed from £12,300 to £6,000, while the dividend tax allowance will be halved to £1,000. This means anyone with stock market investments outside an ISA could be facing a much higher tax bill. The £20,000 tax-free allowance for an ISA remains in place and is still a great way to save money without it being taken in tax.

In the next tax year, income tax thresholds will also be frozen, and so more people will cross the threshold into paying a higher rate of tax. And it’s worth remembering that wage increases aren’t keeping up with inflation at the moment, so any money employees have remaining after HMRC has taken its share is worth less anyway. And when we are facing prohibitive hikes in fuel, food and utilities costs, and there is a high likelihood of council tax being increased again for 2023/24 too, we need every penny we can get. This is why employers have a duty to be sympathetic to employees facing financial difficulties, and one easy way to do this is to offer a salary sacrifice car scheme, in which an employee can make considerable tax savings.

Income tax savings with a salary sacrifice car scheme

A salary sacrifice scheme for a low emission car (such as an electric vehicle) benefits from a number of tax/ NIC advantages.  Firstly, the provision of the car can be made via salary sacrifice meaning employees will pay less tax/ NIC.  Secondly, a zero emission electric car is only taxed on 2% of their list price.

The salary sacrifice means they pay a reduced amount of income tax because effectively, their gross salary has been reduced. In real terms, this increases their take home pay, and also qualifies them – and you the employer for that matter also – for a reduction in national insurance contributions.

With the impending freezing of income tax thresholds it is worth the employer explaining the effect this could have on their employees, and how applying for a salary sacrifice car scheme is one way of navigating this to free up important liquid cash. It is possible, of course, that your employees may also have stock market investments which are affected by the April 5^th changes, so in the lead up to the end of the current tax year, an employer may want to ensure its employees are fully informed.

Contact Pink Salary Exchange for the best salary sacrifice car scheme

Our salary sacrifice car scheme is HMRC-approved and provides great tax advantages, which in the current economic climate can make a real-time difference for struggling families. Employers can contact Pink Salary Exchange for expert advice on the tax rules relating to salary sacrifice car schemes, so that your employees are fully informed on the benefits, and how, in the run-up to the new tax year after April 5^th, enrolment on the scheme can provide some significant financial wriggle-room, so contact our experts at Pink Salary Exchange today.