UK Salary Sacrifice Car Calculator 2026/27
Calculate exactly how much you save on income tax and National Insurance through a salary sacrifice car scheme — and see the true net cost including benefit in kind tax.
How salary sacrifice car schemes work
A salary sacrifice car scheme is an arrangement between you and your employer where you agree to give up a portion of your gross salary in exchange for the private use of a car leased by your employer. Because the sacrifice is deducted before income tax and National Insurance are calculated, you effectively fund the car from pre-tax income. On a basic rate tax rate of 20% and NI at 8%, every £1,000 sacrificed costs you only around £720 in take-home pay.
The employer arranges a fully maintained, insured lease vehicle — often including servicing, tyres, and roadside assistance — and deducts the agreed gross amount from your payslip. At the end of the contract (typically 2–4 years) the car is returned. Unlike a personal lease, there is no credit check on you personally in most schemes as the lease is the employer's liability, though some providers do carry out credit assessments.
Why electric vehicles are the most tax-efficient choice
The benefit in kind (BIK) tax rate on fully electric vehicles is just 3% of the car's P11D value in 2026/27. HMRC announced that EV BIK rates will rise gradually in subsequent years (to 4% in 2027/28 and 5% in 2028/29), making 2026/27 still an excellent time to enter a scheme. By contrast, petrol and diesel cars attract BIK rates of 25–37% depending on CO2 emissions, and hybrid vehicles range from around 8–14%. The lower the BIK rate, the smaller the additional tax charge you pay on the company car benefit — and for EVs this charge is so modest that the income tax and NI savings from the sacrifice typically exceed it by a considerable margin.
For example, a basic rate taxpayer sacrificing £500/month gross on an EV would save approximately £100/month in income tax and £40/month in NI. The BIK tax on a £35,000 EV at 3% is only about £17.50/month. The net effective cost is therefore around £360/month — often cheaper than a comparable personal lease inclusive of insurance and servicing.
Who benefits most — and what to watch out for
Higher rate taxpayers save at 40% on the sacrificed amount rather than 20%, making the savings substantially larger. However, even basic rate taxpayers benefit meaningfully, especially on EVs. Important caveats: the sacrifice reduces your contractual gross pay, which can affect mortgage applications (lenders may not add the sacrifice back), pension contributions (if linked to a percentage of pensionable pay), and certain state benefits calculated on earnings. Those on maternity or paternity leave should check carefully, as statutory pay is based on average earnings and could be affected if salary sacrifice was recently implemented. Early termination of a salary sacrifice scheme can carry fees, so check the exit terms before committing. Use our pension calculator to understand how a lower gross salary affects pension growth.
Related calculators
Use the salary calculator to see your overall take-home after the sacrifice. Our take home pay calculator breaks down tax and NI at your current salary. The income tax calculator shows your marginal rate — higher rate taxpayers save more from salary sacrifice. The national insurance calculator shows your NI contribution and how the sacrifice reduces it. Our pension calculator helps you see the impact of lower pensionable pay. The bonus and commission calculator is useful if your employer pays bonuses and you want to understand total compensation.
Frequently asked questions
Your employer leases a car and you give up a portion of your gross salary in exchange for private use of that vehicle. Because the sacrifice is taken before income tax and National Insurance are calculated, you effectively pay for the car using pre-tax money. The scheme usually includes insurance, servicing, and maintenance. The car is returned at the end of the contract period, typically 2–4 years.
The benefit in kind (BIK) tax rate on fully electric vehicles is just 3% of the car's P11D value in 2026/27, compared to 25% or more for petrol or diesel cars. BIK tax is an additional charge you pay on top of the scheme — but for EVs it is so low that the income tax and NI savings from the salary sacrifice typically far outweigh it. HMRC has confirmed EV BIK rates will rise gradually after 2026/27, but they remain highly favourable compared to combustion engine vehicles.
Benefit in kind (BIK) tax is charged when your employer provides a non-cash benefit — such as a company or salary sacrifice car — for private use. HMRC treats the benefit as additional taxable income, calculated as the BIK percentage multiplied by the car's P11D value. You pay income tax at your marginal rate on that notional income. For an EV at 3% BIK, a £35,000 car generates only £1,050 of taxable benefit per year — a relatively modest cost compared to the tax savings from the sacrifice itself.
Your employer decides whether to offer a scheme and may set eligibility criteria. The key legal constraint is that the sacrifice cannot reduce your gross pay below the National Living Wage — this limits scheme access for lower earners whose salary leaves little headroom. Higher rate taxpayers benefit most because they save tax at 40% rather than 20%. Most schemes also require you to have passed your employer's probation period. Some providers carry out credit checks even though the lease is in the employer's name.