Salary sacrifice is an arrangement between an employer and an employee, where the employee agrees to give up a portion of their gross salary in exchange for a non-cash benefit. One common example is car leasing, where employees sacrifice part of their gross salary in return for the use of a company car. This reduction in gross salary lowers taxable income, which can also reduce National Insurance contributions.

Your student loans will be affected, as they are calculated based on your gross salary, which will be reduced by salary sacrifice. This is something to consider, as the repayment of student loans may then take longer.

Private sector pensions, where both the employee and employer contribute monthly, should not be affected by salary sacrifice. This is the most common type of pension. Your pension contributions are calculated based on your salary before salary sacrifice is deducted from your gross salary.

To be eligible for salary sacrifice, your salary must be above the national minimum wage after the salary sacrifice deduction. Employer requirements may vary, but typically, you must have a valid UK driving license, be above 18 and under 75 years of age, and be a permanent UK resident.

Benefit in Kind (BIK) is a tax paid by employees who receive benefits or perks in addition to their salary. For example, if you have a company car for private use, you will need to pay a BIK contribution. The BIK amount varies, and below is an explanation of how to calculate it for your vehicle.

It is calculated based on the P11d value of the vehicle, its fuel type and CO2 emissions.

With salary sacrifice, employees give up a fixed portion of their gross salary in exchange for a non-cash benefit, such as a new car. This reduces their take-home pay, but it also lowers their tax and National Insurance contributions.

Yes, you do, as the scheme is classed as a benefit provided by your employer, so you will need to pay Benefit in Kind (BIK) tax on it. However, with electric vehicles, the BIK tax is considerably lower compared to vehicles that produce emissions, which is why salary sacrifice has become such a popular choice.

You don’t need to show any salary sacrifice on your tax return. You only need to include your gross pay, which will already reflect the salary sacrifice amount deducted.

With leasing, the car is returned at the end of the contract.

You can allocate anywhere from 0-100% of the savings to the employee or choose not to provide any savings to the employee at all.

It’s a great benefit for employee retention and attracting top talent, offering employees something highly valued by many.

We manage the entire process, from setting up company credit to providing vehicle quotes—we handle it all for you.

Tailor your business fleet with CO2 limits, contract mileage, and more.

Today, environmentally responsible businesses are reducing their emissions, contributing to a greener future.

The difference is that salary sacrifice is a lease taken out by the employee, with monthly payments deducted from their salary, whereas BCH (Business Contract Hire) is a flexible lease held by the employer. Salary sacrifice is more beneficial for employees as it offers tax and National Insurance savings, while BCH provides businesses with greater flexibility for company use.

Salary sacrifice reduces an employee's gross salary because the payments are deducted before tax. As a result, both tax and National Insurance contributions are lower since they are calculated on the reduced gross salary.