Salary sacrifice car scheme

1.) What is salary sacrifice?

A salary sacrifice is a non-cash benefit and it reduces an employee’s entitlement to cash pay. A salary sacrifice is an arrangement employers may make available to an employee through a salary sacrifice scheme, you can pay less tax and avoid upfront costs. In brief, a salary sacrifice scheme (also known as a salary exchange) is an arrangement where part of their pre-tax salary is in exchange for other benefits usually non-cash items. Gross salary or pre-tax benefits offer advantages for employees and employers.

2. How salary sacrifice works when it comes to cars?

An employee sacrifices a fixed amount of their salary each month in exchange for a brand-new car. The amount is taken before income tax and national insurance, so employees save tax and national insurance contributions when they buy a car through their employer. The idea behind salary sacrifice is a simple one, an employee can give a part of your salary and in return, the employer gives non-cash benefits such as a car.

A salary sacrifice car is a car you lease from a third-party supplier that has partnered with your employer. The cost of the car is deducted from the salary each month before you are taxed. Unlike company car schemes, where the company pays for the car, in salary sacrifice arrangements an employee pays for the car and it is the employee’s responsibility.

It is important to clarify that a salary sacrifice car is still eligible for a company car tax, known as…