Salary Sacrifice - How it Works
Salary Sacrifice - a smart, simple and cost-effective way to finance your vehicle
Salary Sacrifice schemes allow employees to exchange a portion of their gross salary for a fully maintained, company-leased electric car. Because payments are taken before tax, you can save on Income Tax and National Insurance — often making it significantly more cost-effective than Personal Contract Hire (PCH).
The greatest savings are achieved with electric vehicles, and your package can be further enhanced with fully comprehensive insurance and a professionally installed home charger. Everything is bundled into one simple monthly cost, making the switch to electric easy, affordable, and hassle-free.
Salary Sacrifice Eligibility
Many employers set their own eligibility criteria for participation in the scheme. Below is a list of common eligibility and affordability requirements, some of which may be mandated by the vehicle funder or motor insurer.
- Employees may be required to be between 18 and 75 years old
- Employees must hold a valid driving licence for the duration of the lease period
- Employees must be a permanent PAYE employee & have completed their probationary period
- Employees must be permanent UK residents
- Employees' gross basic pay must not fall below the National Minimum Wage or National Living Wage after the salary sacrifice deduction
Already enrolled in our Salary Sacrifice scheme? Access your account portal
How Salary Sacrifice Car Leasing Reduces the Cost of Driving an Electric Vehicle
Salary Sacrifice Leasing allows eligible employees to exchange a portion of their taxable salary for a brand-new leased vehicle over a contract of 24 to 48 months. As the scheme is considered a benefit, HMRC Benefit-in-Kind (BIK) tax applies.
The savings come from the fact that the salary deduction is taken from your gross salary before tax and National Insurance, making it more cost-effective than leasing the vehicle personally. Your quotation will include clear calculations to show exactly how much you could save.
Benefits for the Employer
- Tax efficient, reduce National Insurance contributions
- Attractive benefit, attract & retain the best talent
- Reduce risks associated with 'Grey Fleet' vehicles
- No intital setup fees
- Optional Early Termination insurance reduces risk
Benefits for the Employee
- Save up to 40% in Income Tax & National Insurance
- Drive a new, fully insured Electric or Plug-in Hybrid vehicle
- Full servicing, maintenance & tyres included
- Road Tax included
- No personal credit checks required
Yorkshire Fleet explains everything you need to know about Salary Sacrifice in the latest episode of The Lease Guys Podcast with guest Tax Expert, Phil Thompson of Lloyd Dowson Accountancy.
Salary Sacrifice FAQs...
A Salary Sacrifice car scheme is a tax efficient non-cash benefit, whereby an employee sacrifices part of their gross salary in exchange for a fully maintained Electric Vehicle (EV). As the deduction is taken from their gross salary, it reduces their income tax and national insurance contributions.
The scheme provides the employee with a fully insured Electric Vehicle, including full servicing, maintenance, replacement tyres, road tax and roadside assistance for the duration of the contract. It is also possible to include Early Termination insurance to limit the Employers exposure if the Employee leaves the business.
Contract terms can run from 2 to 4 years. Generally speaking, the longer the term of the contract, the lower the cost of the monthly rentals, and typically 3 or 4 year contracts are the most popular and offer the best value for money.
If we are able to source a suitable vehicle from UK stock, a lead time of 10 – 14 days is usually achievable. If we need to place a new factory order built to your specification and colour, lead times can vary from 2-3 months to over 12 months, depending on the make and model. We use a wide network of suppliers throughout the UK, so if there is a rare vehicle out there, we can usually locate it!
At the end of the contact term, Yorkshire Fleet will arrange for the vehicle to be collected, either from the company or employee address. As part of this collection process, the vehicle will be appraised, and any excess mileage or damage which falls outside of the published fair wear and tear guide will be charged back to the employer (and may then be subsequently re-charged to the employee, which would be detailed in the terms of the agreement).
No, Salary Sacrifice and the associated fleet discount terms and tax savings are not accessible through the main dealer network.