Salary sacrifice car scheme for employers

A salary sacrifice car scheme allows employees to lease a vehicle through their employer using reductions taken directly from gross salary before tax and National Insurance contributions are applied. This can help employees access a car in a more tax-efficient way compared to traditional personal leasing or finance arrangements. In many cases, employees can reduce monthly motoring costs while benefiting from a package that may include insurance, servicing, maintenance, breakdown cover and MOTs. For employers, a salary sacrifice car scheme can support employee wellbeing, improve retention and strengthen benefits packages without the complexity of managing multiple providers separately.

Leasing an electric car through our salary sacrifice car benefit is extremely cost effective, as our benefit combines tax efficiencies with full manufacturer discounts, and routine servicing, maintenance are included. Reductions are made from employees’ gross salaries, so they can also make significant savings on both their Income tax and National Insurance.

Savings will vary depending on your choice of car and your salary. There are hundreds of cars to choose from, but the cars delivering the best savings through salary sacrifice are electric vehicles due to the low CO2 emissions, which means there is a lower company car tax or benefit in kind tax.

Organisations will normally report the value of the car benefit to HMRC either through their payrolling of benefits (Tax at Source) or through the P11D process. If a benefit is 'taxed at source' it means that the benefit you receive has already had the benefit-in-kind tax taken through payroll. In terms of benefit in kind, it means that employees don’t have to notify the tax office about their salary sacrifice car.

If your 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. Doing this promptly once the car is delivered ensures the correct amount of tax is paid in each year of the lease.

Our team cannot offer either legal or tax advice, and so we suggest that you seek a professional to answer any tax-related questions that you might have. However, you might also be able to find helpful information by visiting this company car page on the HMRC website.

Yes, a car purchased through salary sacrifice would be deemed a Company Car benefit in kind, and taxed as such. Any quote you receive for the car will confirm the taxable value of the car. We suggest that you seek professional assistance should you have any tax queries regarding this.

We work with employers to offer a range of lifestyle protections should an employees’ circumstances change such as maternity or paternity leave, redundancy, resignation and long-term sickness so that there are no early termination fees due. If you have a car through a salary sacrifice scheme, please check your scheme policy to understand what is and isn't included. 

At the end of their salary sacrifice car scheme, employees will have the choice to return their car, order a new car, or purchase the car at its market value.

With a salary sacrifice car lease, employees agree to exchange part of their gross salary in return for access to a vehicle through their employer’s scheme.

Because reductions are made before tax and National Insurance contributions are calculated, employees may reduce their taxable income and improve affordability compared to personal leasing.

The exact savings depend on factors such as salary, tax band, Benefit-in-Kind rates and the type of vehicle selected. Electric vehicles are often particularly attractive because of lower Benefit-in-Kind tax rates.

Employers can also make National Insurance savings through the scheme, making it a valuable employee benefit as well as a practical financial solution.

The Perkbox car benefit scheme is designed to provide employees with a complete driving package rather than just access to a vehicle.

Depending on eligibility and vehicle selection, the scheme can include:

• Fully comprehensive motor insurance

• Servicing and maintenance

• MOTs

• Breakdown assistance

• Road tax

• Access to electric and hybrid vehicles

• Fixed monthly payroll reductions

Bringing these costs together into one package helps employees manage motoring costs more predictably while reducing admin and unexpected expenses.

Electric vehicles are often one of the most cost-effective options within a salary sacrifice car scheme because they currently benefit from lower Benefit-in-Kind tax rates compared to many petrol or diesel vehicles.

This can help employees access newer electric vehicles with lower monthly costs than they may expect through personal leasing or finance.

For employers, electric vehicle salary sacrifice schemes can also support sustainability goals and demonstrate a commitment to environmentally responsible employee benefits.

As more businesses look to improve ESG performance and reduce emissions, electric car salary sacrifice schemes are becoming increasingly popular across the UK.

No. Employees do not need to complete a traditional personal credit check to access the Perkbox salary sacrifice car scheme.

That can make the scheme more accessible for employees who may not want to use personal finance or take out a separate leasing agreement independently.

Eligibility requirements still apply, and employees must meet the criteria set by their employer and the scheme provider.

Removing the need for a separate finance application can help make a car salary sacrifice scheme feel simpler, more accessible and lower risk for employees comparing it against traditional car leasing.

A salary sacrifice car scheme can help employers strengthen employee benefits while also supporting recruitment, retention and employee wellbeing.

Employers may also reduce Employer National Insurance contributions because salary reductions are made before tax calculations.

Additional employer benefits can include:

• A more competitive employee benefits package

• Improved support for financial wellbeing

• Increased employee satisfaction and retention

• Support for sustainability and EV adoption goals

• Reduced pressure on employees facing rising living costs

For organisations looking to improve employee experience without increasing base salaries, a car lease scheme for employees can provide meaningful value in a practical, everyday way.

At the end of a salary sacrifice car lease, employees usually return the vehicle in line with the agreement terms.

If an employee leaves the organisation before the agreement ends, early termination terms may apply depending on the circumstances. However, the scheme includes lifestyle protections designed to help reduce financial risk in situations such as redundancy, resignation, parental leave or long-term sickness.

This is one reason many employers choose a managed salary sacrifice car scheme rather than asking employees to arrange separate leasing independently.

Employees should always review the full agreement details before proceeding with a vehicle order.