Salary Sacrifice Car Scheme
A salary sacrifice scheme lets employees drive a new electric or plug-in hybrid vehicle by giving up part of their gross salary — reducing PAYE, National Insurance and Benefit-in-Kind exposure, at no net cost to the business.
Cost-neutral for employers
The scheme is designed to be cost-neutral to implement for the business.
No credit check
Salary sacrifice is not a personal credit agreement, so no credit check is required of the employee.
Fully inclusive
Insurance, maintenance, breakdown assistance and road tax are typically included in the sacrificed amount.
EV-focused
The biggest savings come from electric vehicles, thanks to low Benefit-in-Kind rates.
How it works
An employee agrees to sacrifice part of their gross (pre-tax) salary in exchange for the use of a new vehicle. The employer deducts the agreed amount from payroll each month, and because the deduction is taken before tax and National Insurance, both the employee and employer typically save money compared with a traditional car allowance.
The process is simple: the employee selects a vehicle from the scheme, agrees the contract terms, and the vehicle is delivered — with insurance, maintenance, breakdown assistance and road tax usually bundled into the monthly sacrifice.
Why electric and plug-in hybrid vehicles
Because company car Benefit-in-Kind tax is calculated on a vehicle’s CO2 emissions and list price, fully electric vehicles attract a very low BIK rate — which is where the bulk of the savings in a salary sacrifice scheme come from. Employees can typically save 30–60% on the cost of driving a premium electric vehicle compared with buying or financing it personally. Plug-in hybrids are also available on the scheme, though the savings are generally lower than for a fully electric vehicle.
Eligibility
The vehicle can generally be used for both business and personal driving. If an employee changes job, the vehicle may need to be returned or an early termination fee may apply — full terms are confirmed before enrolment. Salary sacrifice can typically run alongside an employer’s existing scheme provided it is not exclusive.
- —Typically aged 25–75 (21+ for leasing)
- —UK resident
- —Usually 6+ months in current employment
- —Valid UK driving licence
- —Part-time employees may be eligible depending on salary and contracted hours
Salary Sacrifice Car Scheme — FAQs
Does salary sacrifice affect my mortgage application or other salary-based benefits?
Because your gross salary is reduced, it can affect salary-based calculations such as mortgage affordability, statutory pay, and pension contributions if these are based on your reduced salary. This is worth discussing with your employer or a financial adviser before joining.
What happens if I leave my job?
Leaving your employer usually means the vehicle needs to be returned, or in some cases an early termination fee applies. Your employer’s scheme documentation will confirm the exact process.
Is a credit check required?
No — salary sacrifice is provided through your employer rather than as a personal credit agreement, so a personal credit check is not required in the same way as a personal lease.
Can I choose a plug-in hybrid instead of a fully electric car?
Yes, plug-in hybrids are available on the scheme, though the tax savings are typically lower than for a fully electric vehicle due to higher Benefit-in-Kind rates.
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