A guide to salary sacrifice cars: what you need to know

A salary sacrifice car (otherwise known as a car that you get on a salary sacrifice scheme) is like having your cake and eating it - you get to drive one of the latest cars and save money (it’s actually one of the cheapest ways to drive an EV). Sound too good to be true? Stick with us.

We’re going to break it all down and answer these key questions:

• What is a salary sacrifice car?
• What cars can you get on a salary sacrifice scheme?
• What are the benefits of a salary sacrifice car scheme?
• Why are electric cars leading the way in salary sacrifice?
• How do you choose the right salary sacrifice car?
• How do you get started?

Let’s dive in!

Think of it as a win-win deal between you and your employer. You lease a car through your work, and in return, a chunk of your gross salary goes towards the payments. The beauty? It lowers your taxable income, meaning you make savings on National Insurance and Income Tax, and your employer can save on National Insurance contributions.

Whether you're after a spacious SUV for the family or a compact city car for zipping around town, salary sacrifice schemes cover a range of vehicles to suit different needs - be it petrol, hybrid, or electric.

At Octopus EV, we focus exclusively on electric vehicles. While other providers may offer hybrids or petrol/diesel options, the tax savings on these are much smaller due to higher Benefit-in-Kind (BiK) rates. So, with EVs, you’ll enjoy bigger savings and a more sustainable ride.

What’s in it for you? (Hint: a lot.)

For employees:

• Tax savings: Fancy saving on National Insurance and Income Tax? Of course you do. You can save up to 40% on a brand new EV (depending on your tax bracket).
• All-inclusive packages: Forget budgeting for extras - maintenance, insurance, and breakdown cover are usually part of the deal.
• No upfront costs: Drive a shiny new car without emptying your savings.

For employers:

• Attract and retain talent: A salary sacrifice car scheme says, “We’re the employer you’ve been looking for.”
• Cost-neutral: It’s free to set up and run because your employees pay for the cars through their salary. Everyone wins.
• Save on National Insurance contributions: with every car your employees take, your company will pay less in employer National Insurance contributions (most businesses choose to pass these savings back to their employees, lowering the cost of their car).

Electric cars are the Beyoncé of the salary sacrifice world - they steal the spotlight every time. Here’s why:

• Tax efficiency: Ultra-low Benefit-in-Kind (BiK) rates for EVs mean maximum tax savings.
• Lower running costs: Swap petrol prices for cheaper electricity and fewer maintenance headaches.
• Environmental impact: Save money and the planet. That’s a double win.

It’s no wonder more people are saying goodbye to gas-guzzlers and hello to EVs.

To read more about how electric cars are the future of salary sacrifice schemes, head over to our blog: Why EVs are the future of salary sacrifice cars.

Picking your perfect ride doesn’t have to feel like solving a Rubik’s Cube. Here’s what to think about:

• Budget: Be realistic about how much you’re happy to spend from your pre-tax salary. Use your take-home pay as a guide and make sure you’re comfortable with the monthly cost.
• Lifestyle needs: Consider how you’ll be using the car day-to-day. Do you need plenty of boot space for family adventures? A smaller car for zipping around the city? Or maybe a reliable option for a long commute?
• Fuel type: Electric cars are the tax-efficiency champs, with huge savings on Benefit-in-Kind rates, but hybrids and petrol cars are still an option (albeit a less tax-efficient one).
• Charging: If you’re looking at an EV as an option, you’ll need to consider things like charging at home and/or using public charging stations. Charging an EV at home is so much easier and significantly cheaper than filling up with petrol or diesel - especially if you use smart EV tariffs like Intelligent Octopus Go (which you get an exclusive discount on as an Octopus EV driver, with EV Saver).
• Features and extras: Many schemes include maintenance, breakdown cover, and insurance. Think about other features that matter to you, like in-car tech, comfort, or safety features. It’s your chance to upgrade to the car you’ve always wanted!
• Environmental goals: If sustainability is important to you, an EV could be the way to go. Beyond cost savings, it’s a feel-good choice that aligns with greener living.

Take your time exploring your options. Most schemes let you compare cars side-by-side, making it easier to find the perfect fit.

• Can I choose any car with a salary sacrifice scheme? Yes! Whether it’s petrol, hybrid, or electric, most schemes offer a variety of options.
• What happens if I leave my job? This can differ with each scheme, so it’s best to read the fine print and research this/ask questions when looking into the scheme. Many, including our salary sacrifice scheme, offer protections for the employee and employer if you need to return the car early.
• Are electric cars the most tax-efficient choice? Absolutely. EVs are the top choice for tax savings.

No matter where you are in your salary sacrifice car journey, here’s how you can take the next step:

If your employer doesn’t yet offer a salary sacrifice car scheme

1. Talk to your employer: Get your employer on board with a salary sacrifice scheme. Bring up the idea of a salary sacrifice car scheme with your HR team or manager. Highlight the benefits for both employees and the company.
2. Do your research: Familiarise yourself with how the salary sacrifice scheme works and think about any questions your company might have.
3. Share resources: Point them to guides and providers that make implementing a scheme simple.

If your employer already offers a salary sacrifice car scheme

1. Explore your options: Browse the available vehicles and think about which one suits your lifestyle and budget. Speak to colleagues who’ve already got a car on the scheme.
2. Crunch the numbers: Use a salary sacrifice calculator to understand how much you’ll save.
3. Sign up: Choose your car, complete the necessary paperwork, and get ready to enjoy the benefits of your new ride.

If you’re an employer considering a salary sacrifice car scheme

1. Understand the benefits: Salary sacrifice car schemes are a cost-neutral way to enhance your employee benefits package.
2. Research providers: Look for reputable salary sacrifice providers who handle the admin and make the process seamless.
3. Engage your team: Gauge employee interest to make sure the scheme gives them what they need.
4. Implement and communicate: Once the scheme is live, communicate it clearly to your team and help them understand the benefits of getting a car through salary sacrifice..

Ready to make your next move? Find out how our salary sacrifice car scheme can work for you.