Salary Sacrifice at Citygate Leasing

18th February 2025

Vehicle salary sacrifice | A smart choice for both employer and employee

Salary sacrifice schemes, particularly company cars, have gained popularity all over the UK. This allows employees to exchange part of their pre-tax salary for a vehicle, offering potential savings for both the employee and the employer. But how does salary sacrifice work, and what are the key benefits and considerations? In this blog, we’ll break it down and explore why salary sacrifice for a company car might be the perfect solution for your business or personal needs.

What is the salary sacrifice for a company car?

Salary sacrifices for a company car are arrangements in which employees agree to give up a percentage of their pre-tax salary in exchange for a vehicle. Instead of purchasing or leasing a car privately, the employee gets the car as a benefit, and the cost is deducted directly from their salary before tax. This salary reduction can lower their taxable income, leading to savings on income tax and National Insurance contributions.

One main advantage of salary sacrifice is that the cost of the vehicle is spread out over time. Many schemes offer a variety of cars, including electric vehicles.

Electric vehicles are favoured in salary sacrifice schemes due to their financial and environmental benefits. Employees can spread the cost of a new EV over time, reducing the upfront financial burden.

EVs typically offer lower benefit-in-kind tax rates, resulting in significant tax savings, while also benefiting from lower running costs, such as cheaper fuel and reduced maintenance. Government incentives, like rebates and tax exemptions, further enhance the appeal. EVs provide a cost-effective, green, forward-thinking option for salary sacrifice schemes.

These vehicles often benefit from reduced Benefit-in-Kind tax rates, making salary sacrifice an even more attractive option for employees.

The main advantage of salary sacrifice is the potential for tax savings. Employees pay less income tax and National Insurance by reducing their taxable salary. This primarily benefits those choosing low-emission or electric cars with lower tax rates.

Affordable Access to a New Car Buying or leasing a car privately can be costly. Salary sacrifice allows employees to drive a new car without the significant upfront costs or high monthly payments. Many schemes also include maintenance, insurance, and breakdown cover, making them more affordable.

Environmental Benefits Many salary sacrifice schemes offer electric or hybrid cars, which help reduce carbon footprints. These cars also come with lower tax rates, making them an affordable and eco-friendly option.

Convenience and Peace of Mind
Salary sacrifice removes the usual car worries. Most schemes cover insurance, maintenance, and MOTs so that employees can enjoy a hassle-free driving experience with peace of mind.

To make salary sacrifice work for employers and employees, it’s essential to consider the financial implications carefully. Here are some tips:

Consider the BIK tax rates when choosing a vehicle that suits your lifestyle and needs. Electric or hybrid cars are often the most cost-effective options.

Ensure the salary sacrifice scheme includes maintenance, insurance, and breakdown cover, as these services can significantly enhance the deal.

Before entering any salary sacrifice agreement, employees and employers should consult with a financial advisor or tax professional to ensure they understand the tax implications and overall benefits.

At Citygate Leasing, we believe salary sacrifice for a company car is a win-win for employees and employers, offering significant tax savings, access to new electric vehicles, and environmental benefits. Our tailored salary sacrifice schemes provide a range of the latest electric vehicles, allowing employees to enjoy innovative technology and reduced running costs with minimal upfront investment. While the scheme offers many advantages, it's essential to consider factors like reduced take-home pay and potential impacts on other benefits. To ensure you're making the most of a salary sacrifice arrangement, we recommend doing thorough research, understanding the full scope of the scheme, and consulting a financial advisor. At Citygate Leasing, we're here to guide you through the process and offer valuable, sustainable electric vehicle options that benefit your employees and your company.