Salary Sacrifice for Car Leasing: A Tax-Efficient Vehicle Solution

Explore the world of salary sacrifice for car leasing and learn how this innovative approach allows employees to exchange part of their salary for a brand-new company car. Discover the benefits, considerations, and how to get started with our car leasing experts. Make informed choices for tax-efficient, sustainable, and budget-friendly vehicle solutions.

What is Salary Sacrifice?

Salary sacrifice is an arrangement between an employer and an employee where the employee agrees to give up a portion of their salary in exchange for a non-cash benefit. One common application of salary sacrifice is for car leasing, where employees can exchange a portion of their gross salary for the use of a company car. This lower gross salary reduces the taxable income and, in turn, can reduce the BIK tax liability. It's an attractive option for both employers and employees for several reasons.

Benefits of Salary Sacrifice for Car Leasing

1. Tax Efficiency

One of the primary advantages of salary sacrifice car leasing is the potential for tax savings. When employees sacrifice part of their salary for a car, the sacrificed amount is not subject to income tax or National Insurance contributions, making it a tax-efficient way to get a new vehicle.

2. Access to New Vehicles

Through salary sacrifice, employees can access new and often more environmentally friendly vehicles. This can be a great incentive for employees who want to drive the latest models without the burden of high upfront costs.

3. Simplified Costs

Salary sacrifice schemes typically include all vehicle-related costs, such as insurance, maintenance, and servicing, in a single monthly payment. This can help employees budget more effectively and eliminate unexpected expenses.

4. Environmental Benefits

Many salary sacrifice car schemes offer low-emission or electric vehicles, contributing to a more sustainable and environmentally friendly fleet. This aligns with many companies' green initiatives.

Key Considerations

1. Eligibility

Not all employees are eligible for salary sacrifice schemes, and the specific eligibility criteria can vary among employers. Check with your HR department to determine if you qualify.

2. Impact on Pension

Reducing your salary through salary sacrifice can affect your pension contributions. Be sure to understand how this might affect your retirement savings.

3. Affordability

While salary sacrifice can offer cost savings, it's essential to ensure that the reduced salary is still sufficient for your financial needs.

4. End-of-Term Options

Know your options at the end of the lease term. You might have the opportunity to purchase the vehicle or start a new lease.

You may not realise that Salary Sacrifice offers benefits not only to the employee but also to the employer. Here are just a few advantages for an employer:

Salary Sacrifice not only enhances employee retention and attracts top talent in competitive markets but also provides significant company benefits. Employees can enjoy the opportunity to drive a brand-new car while saving costs on taxes and National Insurance contributions.
When employees opt for Salary Sacrifice to pay for their lease, they reduce their gross salary accordingly. As an employer, this reduces your National Insurance contributions. These savings can either be reinvested into the business or passed on to employees to decrease their monthly car expenses.
It's also an effective method to encourage employees to drive electric vehicles, thereby reducing your business's indirect emissions. Salary Sacrifice makes leasing electric cars more affordable and accessible for employees.
Early termination protection can also be included, meaning if an employee's circumstances change and the lease must be terminated, you will be covered. Alternatively, the lease can be transferred to another person, or the employee can take it to their next business if allowed.

Salary Sacrifice is a fantastic employee benefit, offering the opportunity to drive a brand-new car, even electric, at a low affordable cost. Here are some key benefits of Salary Sacrifice:

With Salary Sacrifice, when you lease a vehicle, you avoid paying an initial payment and instead make fixed monthly payments for the duration of your contract.
Lease a brand-new car at an affordable price with all the latest technology, safety features, and the option to go electric or hybrid. Customise your order with a factory build if desired.
Your monthly payment includes insurance and tax, along with maintenance and roadside assistance, ensuring a single monthly cost. This means there are no additional costs for things like new tyres or breakdowns, allowing for accurate budgeting.
Don't worry about depreciation with Salary Sacrifice. When you buy a car, it loses about 35% of its value as soon as it leaves the dealership. With Salary Sacrifice, you can return the car at the end of your tailored contract and get a brand-new one without losing value, as you do not own it.

How to Get Started

If you're interested in a salary sacrifice car leasing scheme, contact your HR department to see if your employer offers such a program. They can provide you with the necessary details and guide you through the application process.

Contact Us for More Information

If you have any questions about salary sacrifice for car leasing or want to explore your options, don't hesitate to get in touch with our car leasing experts. We're here to help you make an informed decision and find the right car leasing solution that suits your needs and budget.