Salary Sacrifice Car Scheme

We all love the convenience, efficiency and simplicity that comes with electric cars. However, all these qualities can come at a price - especially if you’re comparing like-for-like with an equivalent petrol or diesel car. In simple terms, electric cars can seem pretty expensive.

However, looking at the list price doesn’t give you a particularly accurate picture of the cost of ownership. Over the course of having an electric car, drivers usually make big savings on fuel, vehicle excise duty (road tax) and servicing. In most cases, these savings will quickly off-set the premium you’ll pay to go electric. 

There’s also another way to reduce your outgoings. If you’re employed and earn more than National Living Wage, you may be able to take advantage of a salary sacrifice scheme. The good news is that setting one up is pretty straightforward and there are lots of specialist companies offering the scheme to make the whole process simple and easy to navigate. Click the link below to discover more about how salary sacrifice schemes work.

What are some typical prices for cars?

Here are some ball-park salary sacrifice monthly costs. As the cost includes insurance, like any policy they will vary slightly based on the driver’s age and where they live. Monthly costs will also vary based on a driver’s annual mileage. These prices are the net salary figures for a 40% tax payer, so this is what you’ll actually notice going from your pay packet every month after tax. (Based on 10k miles travelled every month. Quotes generated by Gridserve Car Leasing 19.4.24)

£321 per month
Cupra Born
£372 per month
Smart #1
£389 per month
Toyota bZ4X
£421 per month
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​What is a Salary Sacrifice scheme?​
Salary sacrifice
Want to know how the scheme works?

Salary Sacrifice:


your questions answered

What is included with a salary sacrifice car?

Most schemes include fully comprehensive insurance, annual road fund licence (road tax), replacement tyres, routine servicing and maintenance. In addition, most schemes will include breakdown cover and lifestyle protections should you need to end the agreement early.

What happens at the end of the salary sacrifice car agreement?

Like a PCP scheme, drivers have three options at the end of their contract. 1) order a new car and start a new contract. 2) return the vehicle with nothing else to pay (you’ll need to pay for any damage you’ve caused, though). Or 3) buy the car for its market value.

What happens when my car needs a service?

Most salary sacrifce schemes come with servicing costs included. Depending on your provider, you’ll either contact the scheme operator or your retailer directly to arrange for a service to be carried out. Remember though, it’s up to you to know when a service is due. Most schemes also cover simple repairs such as bulb replacement.

Can I take my car abroad?

Foreign travel is permitted by most salary sacrifice providers, but you will need to give them as much notice as possible (usually a minimum of two weeks). Taking a car abroad requires a number of mandatory documents that prove that you have permission and insurance cover to drive. You’ll need a VE103b certificate before you leave. Most operators will charge a small fee for arranging this, but the certificate will be valid for a year. Operators will also be able to advise on specific document requirements depending on the country you are travelling to. For example, driving into France requires a Crit-Air sticker.

Can my partner/family member drive the car?

You can normally add one additional driver to your company car insurance policy. To do this, you will need to speak to your Fleet Manager/ HR department.

What does ‘taxed at source’ mean?

If a benefit is 'taxed at source' it means that the benefit you receive has already had the Benefit in Kind tax taken off. In terms of Benefit in Kind, it means that employees don’t have to notify the tax office about their salary sacrifice car. If an organisation doesn’t ‘tax at source’ employees will need to ensure the tax office is notified about their car and they will then have the Benefit in Kind tax deducted via their PAYE Coding Notice.

What happens if employees resign or are made redundant?

Most salary sacrifice scheme operators work with employers to offer a range of lifestyle protections. These are in place to cover a change in circumstances, such as maternity or paternity leave, redundancy, resignation and long-term sickness. This protection means that there are usually no early termination fees due. Check with your supplier to see which scenarios are covered and which aren’t. Only sign up if you’re happy to do do.  

Does salary sacrifice reduce taxable income?

Yes it does. Because you are sacrificing part of your salary, the taxable amount is smaller, so you’ll pay less income tax. You and your employer will also pay less National Insurance contributions (NIC).

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