Can I Get A Salary Sacrifice Lease Car?

Chloe Murphy 5 minutes Published: 24/05/2022

It’s no secret that when you’re scoping out new jobs, the benefits package can have a lot of sway. If you’ve got two similar offers, but one comes with all the perks attached, it’s a no brainer.  

But what about companies that mention benefits through Salary Sacrifice?

Salary Sacrifice is a scheme where you pay your employer a pre-tax amount of salary, and in return, receive cash benefits such as childcare vouchers, pension contributions, and bikes for cycle-to-work schemes.

Whether you’re an employer or employee, there’s a lot to consider! We’ll go through how a salary sacrifice car lease works, the pros and cons, and other information you’ll need to decide whether it’s right for you.

Considering offering or taking a salary sacrifice car lease? Lease Fetcher is the UK's first car leasing comparison site - take a look at our business car lease deals to see what's on offer!

How does salary sacrifice car leasing work?

A salary sacrifice car lease works in almost exactly the same way as other salary sacrifice benefits. In exchange for a percentage of your gross salary, your company gives you a brand new car lease for up to 3 or 4 years, free of any upfront costs.

As a result, your overall salary decreases, meaning you pay less towards tax and national insurance, and it could even lower your tax bracket. You just need to pay company car tax (benefit in kind) which we explore more in the next section.

It differs from company car allowances where you are given additional income which you are expected to use for a personal car that will be used for business. You would take out a personal lease yourself in this case, and you pay income tax/NI contributions on this additional allowance, but you don't pay BIK tax.

Your company does not own the car, it is simply borrowing it from the lease company. The leasing company/funder remains the registered keeper of the lease car and you return it at the end of your term. You have to keep it in good condition and stick to an agreed mileage limit (though some brokers offer high mileage lease contracts).

Road tax is included in the lease cost, but you'll need to pay for maintenance and insurance separately (unless your employer adds these on to the package with the broker).

how does salary sacrifice work

Tax on a Salary Sacrifice Lease Car

You need to pay BIK tax on your salary sacrifice lease car.

BIK rates are calculated based on a few things. Your income tax band % (after deducting sacrificed salary), overall car value (P11D value), and most significantly, CO2 emissions, all impact the rate at which this is applied. 

For anyone with their heart set on a petrol or diesel model, it’s likely more expensive going through the salary sacrifice scheme than funding it yourself. Electric cars offer the lowest BIK tax rates (2% for 2022).

calculating tax on salary sacrifice lease car

The Benefits and Disadvantages of Salary Sacrifice for Employees 

If the numbers don’t have you convinced yet, there’s still a whole other host of benefits to Salary Sacrifice leasing.

It goes without saying that there’s a lot to gain for employees, but employers need to know that there’s something in it for them too.

Take a look at our top pros and cons for employees:


  • A brand new car with road tax, MOT, servicing and breakdown cover included.

  • You don't need to pay income tax or NI on the sacrificed salary. With a ULEV car, you could pay less on BIK tax than income tax/NI.

  • No upfront costs, deposits, or credit checks. You won’t have the hassle of working out costs each month, as the monthly payment comes straight out your salary.

  • The car is for business and personal use.


  • As salary sacrifice schemes essentially reduce your salary, this could impact any credit or mortgage applications.

  • If your salary sacrifice car is not a ULEV, you could end up paying more on BIK tax than you would save on income tax/NI.

The Benefits and Disadvantages of Salary Sacrifice for Employers

Employers can also benefit from using the salary sacrifice scheme to provide benefits for their employees. See the top pros and cons below.


  • Don't need to pay NI for employees on the portion of sacrificed salary.

  • Don't need to pay business mileage since the employee is no longer using their personal car for business travel, so they can't claim business miles.

  • Ideal employee benefit for businesses that routinely have employees travelling across company branches or locations.  New vehicles are more reliable and reduce the chance of any unexpected breakdowns.

  • Can reclaim up to 100% VAT on the lease cost if it's solely used for business mileage (not including commuting).

  • Potentially attract employees and increase employee retention by offering the salary sacrifice car scheme across all company levels.

  • A great way to reduce company wide carbon footprint.


  • Complications can arise when staff turnover is high. If your employee leaves during the lease term, the company is left with the ongoing monthly payments, or an early termination charge for ending the car lease early.

  • Salary sacrifice arrangements can lower income employees’ salaries below an acceptable amount.

We have found this fantastic calculator which helps you work out how much both employees and employers stand to gain/lose from a salary sacrifice scheme for a leased car.

Pop details of the car in the tool, details of the lease contract, employee salary, and more, and it'll list all the costs at the bottom.

Is a salary sacrifice car lease right for me?

Salary sacrifice can be a great option for employees looking for a cheaper way to drive a new car. Provided you’re not on a minimum wage contract, you can get all benefits of a new car every 3 or 4 years, without the extra cost.

If you’re a company looking into salary sacrifice for your employees, we’d recommend looking at the HM Revenue and Customs Salary Sacrifice guidance for employers. You can find out how to set up salary sacrifice arrangements, and calculate any tax and national insurance contributions you might need to pay.

But if salary sacrifice isn’t for you, there are alternatives. Our company car vs car allowance comparison and how does business car leasing work articles explore the different options for anyone considering a company car.

If you're ready to compare car lease deals for a work car, Lease Fetcher has rounded up the best business car leasing deals from the UK's leading leasing brokers to make your search so much easier. Our "how does car leasing work" article will help you understand how the process works better, plus our guide for how to get a business car lease explains exactly what you need to know to find the best deal.