Salary Sacrifice Car Scheme

Is a Salary Sacrifice Scheme Right for You? The Complete No-Nonsense Guide 

Thinking about getting a company car through salary sacrifice but not sure if it's worth it? You're in the right place! I'm going to walk you through everything you need to know - the good, the bad, and everything in between. 

Want the quick version? Check out our video at the top of this page where Josh breaks it all down in just a few minutes!

So What Exactly IS Salary Sacrifice? 🤔 

It's pretty simple really: you agree to give up a portion of your pre-tax salary, and in return, your employer hooks you up with a brand-new car. The key part? This happens BEFORE tax and National Insurance are calculated, which means potential savings for both you and your company! 

Your fixed monthly payment typically covers: 

• The car itself (obviously!) 

• Road tax 

• Breakdown cover 

• MOT 

• Maintenance 

• Replacement tyres 

• Accident assistance 

And if you want to go all in, you can even include comprehensive insurance and an EV charger.

The Good Stuff: Why People Love Salary Sacrifice 🚗💨 

1. Tax Savings (Who Doesn't Love Those?) 

By sacrificing part of your gross salary, you're reducing how much income tax and National Insurance you pay. If you're a higher-rate taxpayer, these savings can be seriously impressive! 

2. No More Surprise Bills 

Everything's covered in your monthly payment - no unexpected repair costs or MOT shocks. Your budget stays intact, and your stress levels stay low. 

3. Access to Better Wheels 

Because of the tax savings, you might find yourself able to afford a nicer car than you could normally go for.

4. Credit Score? What Credit Score? 

Since the lease goes through your employer, your personal credit history doesn't come into play. This is a massive win if your credit score isn't exactly stellar. 

5. Insurance Savings 

If your scheme includes insurance (like ours), you could save big - especially if you live in an area with sky-high insurance premiums. 

6. Less Hassle 

Finding and leasing/financing a new car involves tons of research, paperwork, and decision-making. With salary sacrifice, most of this is handled for you. Easy peasy! 

See the savings in action 🥷

Salary sacrifice can be REALLY good if you're looking at getting an EV or plug-in hybrid on lease already. Let's see how it might compare on a couple of cars.

What's In It For Employers? 👔 

Companies aren't just being nice (some are) - there are solid business reasons they offer these schemes: 

• They save on National Insurance contributions 

• It's a cost-neutral way to offer an attractive employee benefit 

• They can offset costs against corporation tax 

• It helps ensure employees are driving suitable, safe vehicles 

• It gives them a competitive edge in recruitment (by 2026, it's estimated 70% of companies will offer salary sacrifice!) 

Are You Eligible? 🧐 

Not everyone can jump into a salary sacrifice scheme. Typical requirements include: 

• Being a permanent employee (not on probation) 

• Working a minimum number of hours 

• Meeting certain income requirements 

• Having been with the company for a specified period 

• Having a clean driving record 

Your employer might have additional criteria too, so it's worth checking the specifics of your company's scheme. 

How to Choose the Right Scheme 🔍 

If you've decided to go for it, here's how to make the best choice: 

1. Compare your options - Look at the terms, benefits, and potential costs of different schemes. 

2. Be realistic about your needs - Don't get carried away with a flashy sports car if what you really need is a practical family vehicle! 

3. Consider the lease term - Make sure you're comfortable with the commitment period. 

4. Do the math - Calculate your potential tax savings against the BIK tax to see if you'll actually save money. 

5. Check the small print - What happens if you leave your job? Are there mileage limits? 

6. Think about the future - Will this car still meet your needs in 2-3 years? 

The Not-So-Good Bits: What to Watch Out For ⚠️ 

Let's be real - no scheme is perfect. Here are some potential downsides: 

1. Early Termination Fees 

If you leave your job or want to end the agreement early, you could face some pretty hefty fees (with us, it's just 3 months of rentals). Make sure you understand these before signing up! 

2. Impact on Other Financial Stuff 

Salary sacrifice lowers your official salary, which might affect: 

• Your borrowing capacity for mortgages 

• Maternity/paternity pay calculations 

• Pension contributions 

• Some state benefits 

3. Benefit-in-Kind Tax 

Yes, you still have to pay BIK tax on your company car. For high-emission vehicles, this could actually wipe out your other tax savings. Electric and low-emission vehicles have much lower BIK rates, making them the smarter choice! 

4. Restrictions on Use 

Some schemes have limitations on personal use or who can drive the car. 

5. Limited Car Choices 

You'll likely only be able to choose a fully electric car or at the very least a plug-in hybrid.

What If You Need to Get Out Early? 🚪 

Life happens, and sometimes you need to change your plans. If you find yourself needing to exit your salary sacrifice scheme early, here are your options: 

1. Find a colleague to take over your agreement (if your employer allows this) 

2. Negotiate with your employer - they might be willing to waive or reduce termination fees 

3. Plan ahead - if you know you'll be leaving, talk to your employer as early as possible 

Still have questions?

Here are the questions we get asked all the time. If you've got your own, feel free to give us a call or get in touch here.