12/02/2025
Two ways to reduce tax paid as an employee 💷 Example 1 An employee with a salary of £80,000 is provided with the use of an electric car for private use under a salary sacrifice arrangement. They give up the equivalent of £750 (gross) in their salary per month (£9,000 per year). The car has zero CO2 emissions, a list price of £60,000, and a cash equivalent value of £1,200 (£60,000 x 2%). The employee saves Income Tax and National insurance of £4,740 (Assuming standard tax codes and other variables) as well as a saving for the employer! Example 2 An employee with a salary of £60,000 per annum is due a bonus of £20,000. They agree with their employer to forego the bonus in lieu of a £20,000 employer pension contribution. This results in a saving of £8,000 in Income Tax (£20,000 @ 40%), as well as £400 in national insurance. As well as an additional saving for the employer! Please note, the vehicle must have emissions lower than 75 grams per kilometre for the highest tax saving! Higher earners above £100,000 per annum will benefit from this even further, with personal tax free allowances tapering down from £100,000 to £125,140 (Resulting in an effective tax rate as high as 60%) Any questions, fire below 👇
