Is it worth getting a car through salary sacrifice?

Introduction: What Is a Salary Sacrifice Car Scheme?

Salary sacrifice car leasing is a way for employees to get a brand-new electric car by giving up (or “sacrificing”) a portion of their gross salary in exchange for the car lease. The key point is that the payment comes out before tax and National Insurance, which means you save money overall.

Your employer sets up the lease through a provider, and the monthly cost is deducted directly from your payslip. The lease usually includes extras like insurance, servicing, road tax, MOTs, and breakdown cover, so it’s a hassle-free, all-in-one package.

Because you're using part of your salary before it's taxed, your overall taxable income is lower, which means you pay less tax and NI. This makes it especially attractive for electric vehicles (EVs), which have very low company car tax rates (Benefit-in-Kind).

Simple Salary Sacrifice Example

Say you earn £40,000 a year. Instead of taking home that full amount, you agree to sacrifice £400 a month (£4,800 a year) to lease an electric car. Your salary is now treated as £35,200 for tax purposes. You save on tax and NI and the car, insurance, and maintenance are all taken care of.

With all the perks on offer, tax savings, a brand-new electric lease car, and everything bundled into one easy monthly payment, it’s easy to see why salary sacrifice schemes are turning heads. But like any financial commitment, they’re not one-size-fits-all. While the idea sounds great on paper, the real value depends on your personal circumstances, tax bracket and driving needs. So, the big question is,  is getting an electric car through salary sacrifice actually worth it?

The Basics - How the Salary Sacrifice Works

It’s important to note that this benefit isn’t automatic; your employer must offer the scheme. If they do, you’ll be able to choose from a selection of vehicles, often with a strong focus on electric or low-emission models due to tax advantages.

One of the biggest draws of the scheme is its all-inclusive, fixed-fee nature. The monthly payment typically covers fixed-fee car insurance, servicing, MOTs, breakdown cover, tyre replacement, and even road tax. This means your motoring costs are fixed and predictable, with little to no extra bills to worry about. There’s also no upfront deposit required, and you don’t need to pass a personal credit check, since the lease is arranged through your employer. It’s a convenient, tax-efficient way to drive a new vehicle, but it comes with terms and conditions that are worth understanding before you sign up.

What Cars Can I Salary Sacrifice?

Through DreamLease, you’ll have access to all major automotive brands, giving you the flexibility to choose a vehicle that suits your needs and preferences, whether that’s a compact city car, a premium SUV, or anything in between. We work with multiple funders and a nationwide network of dealers, which means more choice, better availability, and competitive pricing. As long as the vehicle meets your employer's eligibility criteria (typically low or zero emissions), it can be included in a salary sacrifice arrangement.

The Pros: Why People Choose a Salary Sacrifice over a Personal Lease

Salary sacrifice car schemes have become a popular choice for employees across the UK and for good reason. Here are some of the most significant advantages:

✔️ Tax and National Insurance savings
Because the monthly lease cost is taken from your gross salary (before tax and National Insurance), your taxable income is reduced. This means you pay less in both income tax and NI contributions, which can result in meaningful savings, particularly for higher-rate taxpayers. For electric vehicles, the low Benefit-in-Kind (BiK) tax rates make the deal even more appealing.

✔️ Convenience and lower hassle
Everything is bundled into one monthly payment, typically insurance, servicing, road tax, breakdown cover, and sometimes even tyres and a fitted EV charger. You don’t have to shop around for separate policies or worry about unexpected repair costs. Plus, there’s no personal credit check, since the lease is arranged through your employer.

✔️ Access to new or electric vehicles
Salary sacrifice schemes often focus on low-emission or fully electric vehicles, allowing employees to drive the latest models with advanced tech and low running costs. This is an easy route into EV ownership without the high upfront expense.

✔️ No upfront cost or deposit required
Unlike personal leases or other finance deals that typically require a large deposit, salary sacrifice leases don’t need any upfront payment. That means you can drive a new car without dipping into your savings or taking out a loan.

Salary Sacrifice is a Long-Term Commitment

While salary sacrifice car schemes offer plenty of perks, they’re not without drawbacks. It's important to weigh these carefully to see if the salary sacrifice car leasing truly fits your financial and lifestyle needs.

Reduced take-home pay
Since the lease payment is deducted from your gross salary, your monthly take-home pay will be lower. While you save on tax and National Insurance, you’ll still feel the impact on your day-to-day disposable income. So, it's important to budget accordingly.

Contractual restrictions (e.g., National Minimum Wage rules)
Your salary after the sacrifice must not fall below the National Minimum Wage or National Living Wage thresholds. If it does, you won’t be eligible for the scheme. Additionally, these schemes often come with fixed contract terms, usually 2 to 4 years and are therefore a long-term commitment.

Not suitable for everyone
If you’re a low-mileage driver, the cost might not justify the benefit, especially if you wouldn’t otherwise be looking to lease a new car. It’s also worth noting that the savings for lower tax brackets are less significant. Similarly, changes to tax rates or your income could reduce the financial benefit over time.

Benefit-in-Kind (BiK) tax is rising
One of the biggest things to note is that of salary sacrifice works for electric vehicles due to the ultra-low Benefit-in-Kind (BiK) tax rate, but it won’t stay that way forever. The UK government has confirmed that BiK rates for EVs will gradually increase over the next few years. While the increases are modest, they will slowly reduce the overall tax advantage, particularly for those planning to lease over longer terms.

Is Salary Sacrifice Better for EVs? 

The simple answer is of, course yes. Low Benefit-In-Kind rates on full EVs and high mileage Plug-In-Hybrids increase the savings made.

Below is a table that illustrates the currently planned Benefit In Kind rates over the next few years.

Please note that these figures may be subject to change, to learn more about BIK rates visit Our Page - BIK & Salary Sacrifice Car Lease.

Who Is Salary Sacrifice Leasing Best Suited For?

A salary sacrifice EV lease can be a fantastic deal, but it's not for everyone. Here’s how to know if it aligns with your lifestyle and financial situation.

Best suited for:

• Eco-conscious drivers – It’s a hassle-free way to switch to an electric vehicle and lower your environmental impact.

• Regular commuters – If you drive a predictable number of miles each week, you can get full value from the lease and running cost savings.

• Higher-rate taxpayers – You’ll see the biggest savings thanks to reduced income tax and National Insurance contributions.

Less ideal for:

• Self-employed or freelance workers – Since salary sacrifice is tied to PAYE payroll, it typically isn't available to those outside traditional employment structures.

• Those with fluctuating income or job insecurity – Because it reduces your gross salary, it could affect things like mortgage applications, statutory pay entitlements, and flexibility if your circumstances change.

Real-World Example: A Simple Cost Comparison

Let’s break down how a salary sacrifice lease can work in your favour, using a popular electric car, the Tesla Model Y RWD over a 3-year lease term.

These figures are simplified estimates based on a higher-rate taxpayer (40%), assuming comparable lease terms.

Final Verdict: Is Salary Sacrifice Leasing Worth It?

In the end, whether a salary sacrifice EV lease is right for you depends largely on your lifestyle and tax bracket.

Key Takeaways:

• Salary sacrifice can be a smart, tax-efficient choice, especially for higher-rate taxpayers who can benefit from reduced tax and National Insurance contributions.

• It’s ideal for regular commuters and those who want a hassle-free way to switch to an eco-friendly vehicle without the headache of maintenance and running costs.

• However, it’s not for everyone, particularly if you’re self-employed or have fluctuating income, as the scheme is tied to PAYE payroll.

• If you’re planning to keep the car for a long time or drive only occasionally, a traditional lease might still offer better value.

Ultimately, salary sacrifice can save you a significant amount over time, but it all comes down to whether your driving habits, tax status, and job stability align with the benefits.