Is a Salary Sacrifice Really Worth It for a Company Car?

As more UK employers roll out salary sacrifice schemes for company cars, employees are asking the big question: is it genuinely worth it? With rising living costs and changing tax rules, this benefit could be a game-changer -or a costly mistake -depending on your circumstances.

For many, salary sacrifice offers an attractive way to drive a brand-new car without the upfront costs or credit checks. But like any financial commitment, the devil is in the detail.

What’s Being Offered?

Salary sacrifice for a company car means giving up part of your gross salary in exchange for a leased vehicle arranged by your employer. Because the deduction happens before tax and National Insurance, you reduce your taxable income—potentially saving hundreds of pounds a year. The package often includes:

• Insurance and servicing
  
• Road tax and breakdown cover
  
• Maintenance and MOTs
  

Electric vehicles (EVs) are the star of the show. With Benefit-in-Kind (BiK) tax rates at just 3% for 2025/26, compared to up to 37% for petrol and diesel cars, EVs deliver the biggest savings. For example, a higher-rate taxpayer sacrificing £500 a month could save nearly £200 monthly after tax and NI, even after paying BiK tax of around £13. [awocaccounting.co.uk]

Why It’s Popular

Tax Efficiency: Payments come out before tax, reducing income tax and NI contributions.

All-Inclusive Costs: Bundled packages mean predictable monthly outgoings.

EV Advantage: Electric cars remain heavily incentivised, making them 30–50% cheaper than private leasing in many cases. 

Employer Savings: Businesses also cut Class 1A NIC costs, making this a cost-neutral perk.

The Downsides

Impact on Take-Home Pay: Your salary drops, which can affect pension contributions and mortgage applications.

Tied to Employment: Leave your job and the car goes back—often with early termination fees.

Limited Choice: Schemes usually favour EVs and may restrict model options.

Future Tax Changes: BiK rates for EVs will rise gradually to 9% by 2029/30, so long-term contracts need careful planning. [fleetalliance.co.uk]

Who Benefits Most?

Salary sacrifice shines for higher-rate taxpayers and those keen on EVs. If you’re in the 40% tax bracket and want a hassle-free, sustainable car option, the numbers often stack up. For basic-rate taxpayers or those preferring petrol or diesel, the savings are far less compelling.

What Happens Next?

With EV adoption accelerating and employers seeking greener benefits, salary sacrifice schemes are likely to grow. But before signing up, crunch the numbers: consider your tax band, job security, and whether an EV suits your lifestyle.

Final Thoughts

Salary sacrifice can be a smart way to drive a new car for less—especially if you go electric. But it’s not a one-size-fits-all solution. If you’re weighing up your options, speak to your HR team or a financial adviser to ensure the scheme works for you.

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