Salary sacrifice car scheme

What is a salary sacrifice car scheme?

A Salary Sacrifice Car Scheme is a cost-effective way for employees to lease a new car through their employer. It allows employees to exchange a portion of their pre-tax salary in return for a fully maintained and insured vehicle. This arrangement reduces taxable income, potentially lowering National Insurance and income tax contributions. The scheme often includes expenses like servicing, breakdown cover, and insurance, offering a hassle-free way to drive a new car.

Employers benefit by providing an attractive perk to their workforce while reducing National Insurance contributions. The scheme is particularly popular for electric and low-emission vehicles, aligning with sustainability goals. However, it is essential to understand that salary sacrifice may affect pension contributions and other salary-related benefits. Employers and employees should review their financial situation and company policies before committing to the scheme.

How a salary sacrifice car scheme works

The Salary Sacrifice Car Scheme operates by allowing employees to give up a portion of their gross salary in exchange for a company-provided vehicle. The employer arranges a lease agreement with a vehicle provider, covering costs such as maintenance, road tax, and insurance. As the deduction is made before tax, employees benefit from lower tax and National Insurance contributions. The process typically involves selecting a vehicle from an approved list, signing a lease agreement, and receiving the car for an agreed-upon period.


The lease term usually ranges between 24 to 48 months and often features providers like Tusker, known for offering competitive packages. At the end of the term, employees may return the car, extend the lease, or opt for a new vehicle. Employers must ensure that employees maintain eligibility for the scheme and consider the impact on other salary-based benefits. Additionally, if an employee leaves the company, early termination fees may apply.

Benefits of a salary sacrifice car scheme for employers and employees

For Employees:

• Access to a brand-new, fully maintained vehicle at a lower cost.
  
  

• Potential tax and National Insurance savings.
  
  

• Hassle-free motoring with servicing, insurance, and breakdown cover included.
  
  

• No need for a large upfront payment, unlike traditional car finance.
  
  

• Encourages eco-friendly driving by offering low-emission and electric car options.
  
  

For Employers:

• Enhances employee benefits package, improving job satisfaction and retention.
  
  

• Reduces employer National Insurance contributions.
  
  

• Supports corporate sustainability goals with low-emission vehicle options.
  
  

• Encourages workplace engagement by providing a desirable, cost-effective perk.
  
  

• Strengthens company reputation as a forward-thinking and employee-friendly organisation.
  
  

More about salary sacrifice car schemes

Salary sacrifice is one of several car schemes available to employees. Other options include company car schemes, personal lease agreements, and outright purchase. A company car scheme differs as the vehicle remains the employer’s property, often used for business purposes, whereas a salary sacrifice vehicle is a personal-use benefit. Personal leasing, on the other hand, involves employees arranging their lease independently without tax advantages. Electric Vehicle (EV) salary sacrifice schemes are increasingly popular, given the government’s push towards greener transport and reduced Benefit-in-Kind (BiK) tax rates for EVs.

Before committing to any scheme, employees should review affordability, tax implications, national minimum wage considerations, and contractual terms. Employers should ensure compliance with HMRC regulations and provide clear guidance on scheme participation. Consulting a financial advisor or HR representative can help clarify the best approach based on individual circumstances. Salary sacrifice schemes offer an efficient way to drive a new car while optimising financial benefits for both employers and employees.

Professional salary sacrifice implementation

At Pulse Accountants, we provide a comprehensive service to help businesses implement and manage salary sacrifice schemes efficiently and compliantly.

What We Offer:

• Expert Consultation – We assess your business needs and help design a salary sacrifice scheme tailored to your workforce.
  
  
• Scheme Implementation – We manage the setup process, ensuring compliance with HMRC regulations.
  
  
• Employee Communication – We provide clear, professional communication to employees, ensuring they understand how salary sacrifice works and the benefits it offers.
  
  
• Ongoing Support – Our team is available to answer queries and provide ongoing administrative support.
  
  

Pricing

• Cost: Varies on a case-by-case basis. Based on company size and employees. Contact us to get a quote.
  
  
• Transparent Communication: We communicate the scheme benefits directly to employees and provide full support for any questions.
  
  
• Flexible Payment Options: Our fee is spread over several months, so your business benefits from cost savings immediately.

Why choose Pulse?

With extensive experience in car salary sacrifice schemes, we provide businesses with a seamless and fully compliant salary sacrifice car solution. Our team ensures that both employers and employees understand the benefits and make the most of their opportunities.

Key Reasons to Work With Us:

✔ Industry Expertise – We have a deep understanding of salary sacrifice regulations.

✔ Tailored Solutions – We design bespoke schemes that align with your business and workforce needs.

✔ Compliance Assurance – We ensure full adherence to HMRC guidelines and workplace rules.

✔ Dedicated Support – Our team is available to provide ongoing assistance and ensure smooth implementation.