Salary sacrifice: Five steps to make your scheme a success

Salary sacrifice (sal/sac) is increasing in popularity among companies as a way of giving employees a cost-effective way of accessing a low emissions car. But a high uptake is not always guaranteed. We look at how to make a scheme work for both businesses and staff...

Sal/sac works in a different way to traditional car funding – both for companies and retail customers.

The schemes enable businesses to provide employees with access to new vehicles by ‘sacrificing’ some of their pre-tax salary each month over a fixed term.

As well as leasing the vehicle, the fixed sum usually also includes other running costs such as insurance, vehicle excise duty (VED) and maintenance.

Participants do have to pay benefit-in-kind (BIK) tax on their vehicle, but the current tax regime makes sal/sac a cost-effective way to get behind the wheel of a fully-electric or ultra-low emission car.

David Carey, product management and development at Alphabet (GB) says:

“By selecting a low- or zero-emission car employees can pay comparatively little tax – effectively making their money go further, particularly when compared with a car loan or hire purchase made after tax.