Is a Car Lease Salary Sacrifice Worth It?

A salary sacrifice car scheme can be worth it for some employees, as it can result in a reduction in the amount of Income Tax and National Insurance they pay. However, whether or not a salary sacrifice car scheme is a good idea for a particular employee depends on their individual circumstances, such as their rate of tax and whether they will be able to afford the car if their salary is reduced. Additionally, once entered into a salary sacrifice agreement employees will have less take-home salary and lose some flexibility regarding car choice due to the benefit in kind.

It's advisable to consider all aspects of the salary sacrifice car scheme and consult with an independent financial advisor to determine if it's the best decision for you.

Lease Car Salary Sacrifice Benefits

A salary sacrifice car scheme can offer a number of benefits, including:

Lower taxes: By sacrificing a portion of your salary in exchange for the use of a car, you can reduce the amount of income tax you pay.
Lower car costs: You may be able to afford a more expensive or higher-spec car than you would be able to purchase outright with additional savings available through our SalSac broker network.
Potential fuel savings: You may be able to choose a more fuel-efficient car, which can save you money on fuel costs with all-electric cars offering the highest savings.
Reduced National Insurance Contributions: An employee choosing the scheme will be paying a reduced amount of National Insurance and in turn increase the net take-home salary.
Maintenance and repair costs are included: These costs are included in the overall package so it means less cost for employees and less/no nuisance for the employer.
Newer cars: The scheme allows employees to access newer cars than they may be able to afford to purchase outright as all Salary Sacrificed lease cars are supplied brand new from the UK dealer network.

However, it's important to note that a salary sacrifice car scheme is a long-term commitment and will affect your take-home salary over time. It's important to consider all aspects of the scheme and consult with an independent financial advisor to determine if it's the best decision for you.

Salary Sacrifice Disadvantages

A car lease salary sacrifice scheme can have several disadvantages, including:

Reduced take-home pay: By sacrificing a portion of your salary for the car, you could affect your entitlement to some benefits and pensions.
Long-term commitment: Once you have entered into a car lease salary sacrifice scheme, you are committed to the terms of the agreement and may be subject to penalties if you want to terminate the agreement early.
Mileage restrictions: There is usually a set mileage allowance in car lease schemes, if you exceed it you will need to pay an extra amount, usually a pence per mile charge if you have not been able to amend the mileage allowance.
Changes to taxation: If there are any changed to taxation, i.e. the rate of VAT, Insurance Premium Tax or BIK, this will effect the salary sacrifice.

It's important to consider all the aspects of a car lease salary sacrifice scheme and consult with an independent financial advisor to determine if it's the best decision for you. It's also important to carefully read the terms of the agreement and understand the details of the scheme before making a commitment.

What are the requirements to lease a car with salary sacrifice?

In order to lease a car through a salary sacrifice program, an employee typically must:

Be a permanent PAYE employee of the company.
Have been employed by the company for a certain period of time, typically at least 12 months.
Ensure their basic pay does not fall below the National Minimum or Living Wage after deductions.

Employers who offer a salary sacrifice car scheme will have their own specific criteria and rules that must be met, so it's best to check with your employer for more information. It is also important to know that this type of scheme is not available in all countries/region and might have different taxation or legal implications depending on where you are.