Salary sacrifice car schemes
The most tax-efficient way to drive.
A salary sacrifice car scheme lets employees drive a brand new, fully maintained car while saving on income tax and National Insurance — and saves the employer NI at the same time. It’s one of the few benefits where everyone genuinely wins.
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Find out how salary sacrifice reduces your NI bill and gives you a staff benefit that actually gets used.
See exactly what salary sacrifice means for your take-home pay and what you’d actually pay for a new EV.
How salary sacrifice actually works
Salary sacrifice car schemes can seem very complicated – but that’s why we exist. We know what questions will get the conversation going, and from there we can help design your scheme so that you, your business and your people get what you want from it.
They select a vehicle from the scheme’s approved list — designed around your own policy and values. The scheme operator arranges the lease, insurance, servicing, and tyres.
They agree to give up a portion of their gross salary equal to the monthly scheme cost. This happens before tax and National Insurance are calculated — which is where the saving comes from. Your payroll department get clear instructions on how much to deduct.
The company contracts the vehicle through the scheme provider. Because the employee’s salary is reduced, the employer pays less National Insurance on that portion of their payroll and because it’s a lease, you can claim back 50% of the VAT.
The employee drives a new, safe, fully maintained car for less than they’d pay privately. The employer saves on NI. The scheme runs for a fixed term — typically 2–4 years — then the car is handed back and the employee can choose again.
What’s typically included
Most salary sacrifice schemes include the car lease, insurance, servicing, maintenance, tyres, and breakdown cover — all wrapped into one monthly salary deduction. The employee has no unexpected bills to worry about.
Is there a catch?
The employee does pay Benefit in Kind (BiK) tax on the car — but for electric vehicles this is just 4% of the car’s P11D value in 2026/27. For a £60,000 EV, that’s just £80/month in BiK tax for a 40% taxpayer.
What happens if the employee leaves?
This is managed through the scheme agreement. Most schemes have provisions for early termination — the employer isn’t left exposed. We help you understand and negotiate the right protections before you set up a scheme.
Who can use salary sacrifice?
Any employee earning above the National Minimum Wage after sacrifice can participate. It’s not available to the self-employed or those not on PAYE. We check eligibility as part of our advice process and you can determine other factors like how to handle new starters on probation periods.
For employers
A benefit that saves you money too
Most employee benefits cost the employer money. Salary sacrifice car schemes are different — they reduce your National Insurance liability, meaning they can be cost-neutral or even cost-positive to offer.
For every employee participating in the scheme, you save employer National Insurance on the portion of salary they sacrifice. If an employee sacrifices £650 per month, you remove your employer National Insurance contribution on that amount which adds up to over £1,100 per year back in your business – per employee.
For a business with 20 participating employees, that’s over £23,000 per year in NI savings — from a benefit your employees genuinely value.
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What it actually costs an employee
A worked example based on a real scenario.
Based on: £60,000 gross salary · 40% taxpayer · £60,000 P11D EV · 4% BiK rate (2026/27) · £650/month gross deduction. Figures are illustrative — actual costs vary by vehicle and scheme provider.
- ✓Full OEM manufacturer warranty
- ✓Servicing & maintenance included
- ✓Comprehensive insurance included
- ✓Tyres & road tax included
- ✗No OEM manufacturer warranty
- ✗Fuel & running costs still rising
- ✗Depreciation risk is yours
Employees do pay BiK tax on salary sacrifice cars — but for EVs this is remarkably low. At 4% of P11D value in 2026/27, a 40% taxpayer pays just £80/month on a £60,000 EV. This rises gradually to 9% by 2029/30 — still far below the BiK rates for petrol or diesel vehicles, and more than offset by the income tax and NI savings.
EV BiK rates — confirmed through to 2030
The government has confirmed EV BiK rates several years in advance — giving employees and employers genuine certainty when making decisions.
Even at 9% in 2029/30, EV BiK rates remain dramatically lower than petrol and diesel equivalents. The tax advantage of EVs through salary sacrifice is confirmed and substantial well into the next decade.
Common questions
The questions we get asked most often — answered honestly.
See the numbers for your situation
The worked example above is based on a typical scenario — but your actual saving depends on your salary, your choice of vehicle, and your employer’s scheme terms.
We’ve built a salary sacrifice calculator that gives you a personalised breakdown in minutes — showing your exact net monthly cost, tax savings, and how it compares to personal finance options.
Because the calculator uses real scheme data, we ask for a few details before sharing access — so we can make sure the figures are as accurate as possible for your situation.
Salary sacrifice calculator
Get a personalised breakdown showing your exact net monthly cost and tax savings.
- Personalised to your salary and tax position
- Compares salary sacrifice vs PCP, HP, and cash
- Shows BiK costs across confirmed future rates
- Employer NI saving calculation included
We’ll come back to you within one business day with your personalised figures. No obligation to proceed.
Ready to explore salary sacrifice?
Whether you’re an employer looking to set up a scheme or an employee wondering if it’s right for you — start with a free, no-pressure conversation.
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