A salary sacrifice car scheme works as employees “sacrifice” part of their gross salary in exchange for a leased car for a period of 2, 3 or 4 years. This can be beneficial for both the employer and the employee. The employee saves on income tax and national insurance contributions, and the employer saves on national insurance contributions and offers a fantastic benefit to recruit and retain the best talent. It also supports companies’ Environmental, Social and Governance (ESG) responsibilities with the overall net savings made by moving to electric cars or hybrid vehicles with less than 75g/km of CO2. 

It’s important to think about setting up your salary sacrifice scheme in the right way to give you peace of mind if an employee leaves.  There are a few possible ways to protect your company.  An early termination insurance product adds costs to your employees monthly rental, but covers many scenarios. Charging an administration fee and keeping saved national insurance contributions helps to build a company pot of funds to cover any unexpected costs. Making it clear up front that employees pay any costs if they leave the scheme early is another option, or, lastly, passing the car onto another member of staff until the end of the contract, possibly at a reduced cost to make it an attractive option for someone else.

Synergy Salary Sacrifice allows you to choose a plug-in hybrid car or an electric car.  All plug-in hybrid cars must have less than 75g/km CO2 to qualify for the scheme and remain HMRC compliant. Plug-in hybrid cars have slightly higher benefit-in-kind tax than electric cars, but work well for drivers who do not want a fully electric car, or for those driving higher mileages who want more convenience for longer journey times.

Salary Sacrifice cars must go through your employer’s salary sacrifice scheme, and the cars are usually leased for 2, 3, or 4 years then returned at the end of the contract.  Entering a salary sacrifice agreement means a change in your terms and conditions of employment, as you are effectively “sacrificing” part of your gross salary in exchange for a car on a contractual agreement for a set number of years.   However, salary sacrifice schemes usually offer an overall net saving if you drive an electric vehicle or hybrid car with less than 75g/km of CO2.  This is because you save on income tax and national insurance contributions on your “sacrificed” salary and there is only low benefit-in-kind tax on these vehicles resulting in an overall saving.

An employer’s salary sacrifice scheme means that employees can “sacrifice” part of their gross salary in exchange for a car for a set time which is usually 2, 3 or 4 years. The employee saves on national insurance contributions and income tax, and the employer saves on national insurance contributions and offers an attractive tax-efficient benefit to their staff.  The employee does not own the vehicle, and the responsibility of the car rests with the employer. The employee is therefore subject to benefit-in-kind tax. However, by opting for a fully electric car or hybrid car with less than 75g/km of CO2, the employee benefits from low benefit-in-kind tax rates and therefore achieves an overall net saving. Servicing, maintenance, roadside assistance, and road tax are all included.

There are different reasons as to why you would consider a salary sacrifice car or a company car, and in many cases, it will depend on the job role and objectives of the business. A company car is usually provided because an employee has a role which requires travelling, and has a car in order to be able to fulfil their job responsibilities. In other circumstances, a company car may be offered as part of an overall benefits package to certain employees. Company cars are subject to benefit-in-kind tax. Salary Sacrifice cars work in a slightly different way. An employee sacrifices part of their gross salary in exchange for a salary sacrifice car. The employee saves on national insurance contributions and income tax on the part of their salary they have “sacrificed”. Benefit-in-kind tax is also due on salary sacrifice cars, however by choosing a fully electric car or hybrid vehicle with less than 75g/km of CO2 then the employee benefits from low benefit-in-kind tax and usually achieves an overall net saving. Just like company cars, an employee does not own the salary sacrifice vehicle and the responsibility rests with the employer. Salary sacrifice cars can also be offered to all relevant staff as a company benefit, and also helps towards Environmental, Social and Governance (ESG) objectives with electric vehicles having zero emissions.

Yes, a salary sacrifice car is subject to benefit-in-kind tax, based on the list price and emissions of the vehicle. However, by opting for a fully electric vehicle the benefit-in-kind tax is currently 2% until tax year 24/25, which means that there is usually an overall net saving with a salary sacrifice car. This is because there is no income tax or national insurance contributions to pay on the part of the salary that has been “sacrificed” in exchange for the car; in addition, salary sacrifice vehicles usually benefit from fleet discounts and include all routine servicing, maintenance, roadside assistance and road tax.

At the end of the salary sacrifice car scheme, the car is simply handed back and a new agreement is put in place, or the employee can opt-out of the scheme all together. It’s important to note that the employee will not own the car at the end of the agreement; they should also ensure that the maintenance and servicing have been done in line with the manufacturer’s guidelines, if an MOT is due it has been done, all tyres are legal tread and that the mileage is within the limits of the contract, otherwise excess mileage charges may be applied. If there is any damage to the car which is outside of the industry standard fair wear and tear guidelines, there may be charges, and the employee should check the terms of their agreement with their employer regarding any end of contract charges.