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Salary Sacrifice Car Scheme

A system that works for both business and its employees!

A salary sacrifice scheme alloys an employee to surrender part of their salary, under the terms and conditiones of their employment in return for the employer's agreement to provide a non-cash benefit.

What is the salary sacrifice car scheme?

The Salary Sacrifice Scheme is a way for someone to get non-cash benefits by sacrificing some of their salary. These benefits range from childcare vouchers, increased pension contribution and in this case, a new car. At first, sacrificing part of your salary may not seem the best course of action, but actually, there are many benefits to being part of one of these schemes.

In essence, as an employee, you wouldn’t actually be giving up money because the reduction in salary you’d experience would go towards a non-cash benefit you would usually be paying for. It’s especially helpful if you sometimes find it difficult to budget. So, instead of having to save money to one side for your monthly finance payments, it will automatically be deducted from your wage. One thing to keep in mind is there will be changes to these kinds of benefits if you’re joining the scheme after April 2017, so you might want to get to know the changes before you think about implementing or joining a Salary Sacrifice Scheme.

What are the benefits to employees?

There are many benefits to the Salary Sacrifice Scheme. In the case of a company car, you might get a vehicle you might not be able to afford if you paid for it outright. Also, because your income is lower, this is reflected in the amount of National Insurance and Income Tax that would be deducted from your salary.

In most cases, maintenance, servicing and insurance are included in the scheme, so despite having to pay Benefit in Kind Tax, in the long run this could be considerably cheaper than owning your own car. Even though you’re getting less in your salary, you are actually saving a huge amount of money over a period of time.

Although there are many benefits, it’s important to know how much of your salary you can afford to sacrifice, so make sure you know your expenses before you commit to a scheme like this.

What are the benefits to employers?

Employers get lots of benefits from the scheme. As a company, employers pay National Insurance (NI) on each of their employees’ salaries. So, if employees are earning less after receiving some kind of benefit, the employer pays less NI as a whole. This will save a substantial amount of money in the long term.

In addition to the obvious benefit of saving money, the Salary Sacrifice Scheme can also help to attract and retain staff, especially if the job includes a lot of driving. This can make the company more appealing than their competition.

What are the pros and cons of salary sacrifice?


- Saves employers money from National insurance
- Across a large work force, employers can save huge amounts of money
- Employees can get cars they might not have been able to afford before
- As the salary is lower, so is the employee’s income tax and national insurance
- The Salary Sacrifice Scheme isn’t just for cars. It can contribute to child care and other non-cash benefits


- If you get a car on the salary sacrifice scheme, it’s classed as a company car, so employees have to pay Benefit-In-Kind tax
- Less income means less maternity pay
- Less income might affect mortgage applications



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