Can I Get A Salary Sacrifice Lease Car?

Chloe Murphy 5 minutes Published: 26/08/2021

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.

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, you get to lease a brand new car 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.

Compared with typical company car schemes, where the car is the property of the business, the lease car is only borrowed from the lease company. They remain 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).

You get all the benefits like road tax, servicing and breakdown cover included, when other schemes like company car allowances have you cover the cost yourself (we worked with an accountant to help you understand how your allowance is calculated).

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.

how does salary sacrifice work

Tax on a Salary Sacrifice Lease Car

Though becoming an increasingly popular means of lowering tax, in 2017 the government decided to cut down on tax and NI avoidance, and introduced the HMRC OpRA legislation. 

The Optional Remuneration Arrangements (OpRA) means that salary sacrifice cars with more 75g of Co2/km are now susceptible to a tax called benefit-in-kind (BIK)

BIK is a tax that is applied monthly to your payments, and BIK rates are calculated based on a few things. For salary sacrifice car leasing, your income tax, overall car value (P11D value), and most significantly, Co2 emissions, all impact the rate at which this is applied. 

OpRA significantly reduces the tax benefits for non-electric cars. 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. 

calculating tax on salary sacrifice lease car

Salary Sacrifice Is Best For Electric and ULEV Cars

Fortunately for us (and the environment!), all electric and ultra low emission vehicles (ULEV) are exempt from this company car tax

Until April 2021, the company car tax on electric cars is incredibly low. For Salary Sacrifice lease cars with emissions below 75g of Co2/km, the tax rate is a whopping 0%, increasing to just 1%, and then 2% the following year.

Even with the marginal increase, this still results in a huge cost saving! 

Confused? Here’s an example!

Say you’re earning £30,000 a year. You’ve got your eye on the Tesla Model 3, and though it’s a bit out of your normal budget, you’re considering using Salary Sacrifice. 

After tax and NI, you normally earn roughly £2,003 a month, and you’re willing to sacrifice £410 of this to get your car.

As it’s an electric model and exempt from BIK tax, the total comes to £4,920 a year. This amount comes off your gross pay, and lowers your salary to £25,080

After tax and NI, your new monthly salary is now roughly £1,675, only £328 less than normal, even though you’ve sacrificed £410. Compared to having gotten the lease yourself, this results in a saving of around £82 a month, a staggering £984 a year!

Let’s see this written as a calculation:

  • Initial Salary: £30,000/yr or £2,003/month (after tax)
  • Salary Sacrifice: £410/month or £4,920/yr
  • New Salary: £25,080/yr or £1,675/month (after tax)
  • Difference in Salary: -£328/month or -£3,936/yr

Savings with Salary Sacrifice: £82/month or £984/yr

salary sacrifice lease car is best for evs

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.

  • The car is for business and personal use.

  • 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.


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

The Benefits and Disadvantages of Salary Sacrifice for Employers


  • 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.

  • 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.

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.