SALARY SACRIFICE
What Is Salary Sacrifice Car Leasing?
Salary sacrifice car schemes offer a cost-effective way for employees to access a brand-new, zero-emission vehicle, while providing tax-efficient benefits. Employees agree to give up a portion of their gross salary in exchange for a leased car, and the payments are deducted before tax, leading to lower Income Tax and National Insurance contributions.
This means employees can enjoy significant monthly savings compared to personal leasing. Employers also benefit from reduced National Insurance liabilities and, in some cases, VAT efficiencies. For businesses with a grey fleet, this scheme provides a greener, safer alternative while helping meet Duty of Care obligations and reducing carbon emissions.
How Does Salary Sacrifice Work?
In a salary sacrifice scheme, employees exchange a portion of their salary for a leased vehicle. This lowers their taxable income, reducing their Income Tax and National Insurance payments, while also helping employers save on Employer National Insurance contributions.
Employees will pay Benefit in Kind (BIK) tax based on the vehicle’s CO₂ emissions and list price. However, the tax savings, especially with zero-emission vehicles, often outweigh the costs, making this a cost-effective option for both employees and employers.
Why Electric Vehicles Make the Most Sense
Electric vehicles (EVs) are the most affordable option in a salary sacrifice scheme due to their low BIK tax rate of just 2% (locked in until 2025). With zero CO₂ emissions, EVs help businesses meet sustainability goals while offering employees substantial savings.
A Smarter Way to Drive
A salary sacrifice car scheme offers a simple, sustainable, and affordable way to drive a new vehicle. Whether you’re an employer looking to enhance your benefits package or an employee exploring money-saving transport options, it’s worth considering—especially if you’re thinking electric.
Frequently Asked Questions
We have compiled a list of frequently asked questions to help you find instant answers to your salary sacrifice queries
What is a Salary Sacrifice Scheme?
A Salary Sacrifice Scheme allows employees to give up a portion of their gross salary in exchange for a car. This arrangement can offer Tax and National Insurance savings and works best with Electric Vehicles.
Are there any tax implications for a Salary Sacrifice Scheme?
A Salary Sacrifice scheme will reduce your cash salary, in turn this reduces your tax liability. It is particularly good for higher earners who pay higher tax and National Insurance..
Can part-time employees use Salary Sacrifice?
Yes, it is possible for part-time employees to take a Salary Sacrifice. This will depend on the individual, salary, hours worked and minimum wage requirements.
Will I need a credit check?
No – As the salary sacrifice lease/subscription is arranged through your employer and is not a personal credit agreement, it doesn’t typically affect your credit score.
Using a Salary Sacrifice scheme will reduce your salary on paper, this may have an affect on any mortgage or credit applications you may have.
Who is eligible for Salary Sacrifice?
Anyone who is employed and offered the opportunity by their employer is eligible for salary sacrifice, provided their income doesn’t fall below the National Minimum Wage. This means all employees, including those in full-time, part-time, can participate.
You must also be a UK resident and have a valid UK or EU driving licence without any motoring offences in the last 3 years.
What happens if I leave my job or go on long-term leave?
If you leave your employment or you go on unpaid leave, you may be required to return the vehicle or pay early termination charges. Some schemes offer protection against these scenarios, it is important to check your employer’s policy.
Is Salary Sacrifice worth it?
Salary Sacrifice is a brilliant way to get into some of the latest electric vehicles. And due to flexible contracts, you can swap your car on a more regular basis.
Ready to learn more?
Get in touch for a free, no-obligation consultation. We’ll help you assess whether a salary sacrifice car scheme aligns with your goals—and guide you through the setup from start to finish.
📞 Call us: 01908 262 662
📧 Email us: sales@webcars.co.uk