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What is Salary Sacrifice?

Motor Mistress, Leasing Advice, Salary Sacrifice

What is Salary Sacrifice and is it worth it?

Salary Sacrifice

Could taking a Salary Sacrifice save YOU money?

You have probably heard the term Salary Sacrifice but you may not fully understand what it actually means. Salary Sacrifice car schemes are not offered by every employer and are not necessarily suitable for every employee.

If your employer offers a Salary Sacrifice scheme as part of your benefits package, it is important to understand how it works.

Employers who offer Salary Sacrifice schemes can potentially benefit from making savings on National Insurance (NI) and tax. By offering their employees low CO2 emission company cars via a Salary Sacrifice scheme, they can also help reward and keep valuable staff (as well as recruiting them in the first place).

If you are researching how Salary Sacrifice could work for you, you may find our no-frills guide useful:

How does Salary Sacrifice Work?

  • Employees are given the choice of taking a company car
  • It is usual for Salary Sacrifice schemes to include full maintenance
  • The employer will advise their employee what salary will need to be sacrificed based on the car that they will be taking on
  • This amount is deducted from the employee’s wages and their tax code is adjusted accordingly

How the Employee could benefit from Salary Sacrifice

  • The employee will have the benefit of driving a fully-maintained, low Co2 emission, and efficient vehicle
  • The employee will not have to undertake a finance agreement themselves
  • The employee will save Income Tax and National Insurance (NI)
  • The employee’s resulting wage deductions should effectively represent an overall saving against the true cost of the monthly vehicle cost
  • The monthly cost of the vehicle itself is likely to be competitive as the employee will have also received the benefit of the employee’s manufacturer buying discounts

Although it is claimed that many people can save up to – or even above – £100 per month when comparing Salary Sacrifice to the Car Allowance route, entering into a Salary Sacrifice scheme may not be for you.

It will all depend on the car you will be taking on, your salary and of course, if your employer even offers this scheme in the first place.

We will be providing more useful information on this topic in future articles – in the meantime, you may find it useful to visit the HMRC website and of course, in all instances, it is important that you take independent advice and weigh up the savings that you may – or may not – make if you enter into such a scheme.

Motor Mistress Leasing Advice


Another article that you may find useful: Company Car vs Car Allowance


Important note: This article is for information only; employers and employees should engage a qualified tax adviser before proceeding or embarking on any salary sacrifice scheme. E. &. O. E.