Company Car: Is It Worth It in 2026?
A salary sacrifice company car is an electric car you lease through your employer by giving up part of your gross salary. Because the payment comes out before tax, employees typically save 20 to 50% compared with a personal lease, and the Benefit-in-Kind rate is 4% in 2026/27
This guide covers costs, eligibility, protection if your circumstances change and how employers launch a scheme. All figures are illustrative estimates for 2026/27, and the salary sacrifice calculator shows your own.
What Is a Company Car?
A salary sacrifice car is an employee benefit where you agree to reduce your gross salary in exchange for an electric car. Unlike traditional company car schemes where your employer provides the vehicle directly, you choose from 200+ electric vehicles, new and used, and pay through pre-tax salary deductions. Your employer has to sign up to the scheme.
How Does EV Salary Sacrifice Work?
Your employer partners with a provider like The Electric Car Scheme, and you choose a car within your budget
The monthly cost comes out of your gross salary, reducing your Income Tax and National Insurance
Insurance, servicing and maintenance, breakdown cover and road tax (VED) are included, with tyres and home charging as optional extras.
How Much Can You Save Through Salary Sacrifice?
Savings depend on your tax bracket, but every employee benefits from reduced Income Tax and National Insurance alongside the 4% BiK rate for electric cars in 2026/27. The table shows a popular car at each illustrative salary of £31,000, £62,000 and £135,000, based on 10,000 miles a year, a 36-month term and a flat payment profile.
| Savings breakdown by tax band (illustrative) | Basic rate: £31,000 | Higher rate: £62,000 | Additional rate: £135,000 |
|---|---|---|---|
| Car and trim | Dacia Spring 24kWh Expression 70 52kW | MG4 170kW Premium Long Range 64kWh | BMW iX3 Estate 238kW eDrive40 87kWh |
| Monthly salary sacrifice (inc. VAT) | £379 | £543 | £1,037 |
| Income Tax saving | -£170 | -£217 | -£466 |
| National Insurance saving | -£8 | -£11 | -£21 |
| Average Benefit-in-Kind tax over term | £28 | £64 | £127 |
| Net monthly cost | £229 | £379 | £676 |
| Net cost compared with the salary sacrifice amount | About 40% lower | About 30% lower | About 35% lower |
Illustrative figures from The Electric Car Scheme quote tool, based on 10,000 miles a year, 36 months and a flat payment profile, inc. VAT, with BiK at 4% in 2026/27. The percentages are calculated from the quote figures.
At £62,000, a higher-rate taxpayer sacrificing £543 a month for an MG4 saves £217 in Income Tax and £11 in National Insurance, pays £64 in BiK tax and ends up paying £379, about 30% less than the salary sacrifice amount. A Tesla Model Y RWD at the same salary costs £620 net on a £904 sacrifice. At £135,000, a BMW iX3 Estate costs £676 net on £1,037, about 35% less, because tax relief is given at 45%.
Basic-rate taxpayers (20% Income Tax bracket) also benefit from reduced Income Tax and National Insurance, and the basic-rate example.
Running costs are lower too: from 1 September 2026, HMRC's advisory electricity rates are 7p a mile for home charging and 15p for public charging, so 10,000 miles costs around £700 at home or £1,500 on public chargers.
What If You Earn Close To Minimum Wage?
Your pay after the deduction must stay above the National Minimum Wage, which is £12.71 an hour for workers aged 21 and over from 1 April 2026 (£10.85 for ages 18 to 20, and £8.00 for under 18s and apprentices). On a 37.5-hour week, that's £24,784.50 a year, so on a £27,000 salary you'd have £2,215.50 available, around £185 a month.
Only cars with a monthly salary sacrifice amount within that headroom will fit, and The Electric Car Scheme’s calculator checks minimum wage compliance for you.
What Happens If Tax Rates Change?
Because you pay from pre-tax income, higher tax rates typically increase your saving and lower rates reduce it slightly. The BiK rate, charged on the car's P11D value, rises as shown below, and your monthly BiK tax adjusts if it changes during your lease. Even at 9% in 2029/30, salary sacrifice stays more tax-efficient than petrol and diesel company cars at up to 39%.
| BiK rates by tax year | 2025/26 | 2026/27 (current) | 2027/28 | 2028/29 | 2029/30 |
|---|---|---|---|---|---|
| Zero-emission car | 3% | 4% | 5% | 7% | 9% |
| Petrol and diesel maximum | 37% | 37% | 37% | 38% | 39% |
| Plug-in hybrid (1 to 50g/km) | Depends on electric range | Depends on electric range | Depends on electric range | 18% | 19% |
Is a Salary Sacrifice Company Car Worth It?
For employees who drive regularly and want a new electric car with a single monthly cost, it typically is:
Lower running costs: electricity is typically cheaper per mile than petrol or diesel, and servicing and maintenance are included
No large upfront payment, and no depreciation risk at the end of the term
Road tax: electric cars have paid VED since April 2025, and it's included in your payment
Home charging: The Charge Scheme lets you pay for charging from pre-tax salary, with most drivers saving £400 to £900 a year
Who Can Get a Salary Sacrifice Company Car?
Most employees can, but there are eligibility criteria:
Minimum salary: typically £20,000+ annually
Employment status: permanent contract (probation periods may apply)
Residency: UK resident with a valid driving licence
Pay after deduction: above the National Minimum Wage for your age
Credit: salary sacrifice doesn't usually involve a personal credit check, although an affordability assessment may apply
Image source: Shutterstock
Other points worth checking include:
Pension: electric car salary sacrifice usually leaves your workplace pension untouched, although defined benefit schemes can differ
Mortgage: a reduced gross salary may affect affordability, so check with your lender before you apply
Life insurance: cover may decrease if it's calculated on gross salary
Maternity and paternity pay: statutory payments are based on pre-sacrifice salary
What Happens to the Car If You Leave Your Job or Your Circumstances Change?
With Complete Employer Protection, the employer is covered from day one for redundancy, dismissal, long-term sickness, loss of licence on medical grounds and death, with no excess to pay. Resignation is covered after three months.
Options include:
Return the vehicle with no penalty
Keep the vehicle and continue payments privately, subject to an affordability assessment
Early termination: you're not liable for the remaining lease value if you lose your job or are made redundant
Employee Life Event Support gives a penalty-free route out if a partner is made redundant or becomes long-term sick, or after a divorce, an intra-company move abroad or an involuntary salary cut. Under the Resignation Guarantee, anyone who resigns in their first three months pays no more than three months of deductions.
For HR teams, it's a benefit to put in front of your CFO with improved protection and no net cost to the business.
Salary Sacrifice vs Traditional Company Car
A company-owned car is bought or leased by your employer, who owns the asset, while you pay BiK tax on its value and your gross salary is unchanged. With salary sacrifice, you choose the car and pay from pre-tax income, saving Income Tax and National Insurance, which also sets it apart from alternative leasing arrangements.
For most employees, salary sacrifice typically offers more choice and lower monthly costs, although the right answer depends on your salary, mileage and employer's scheme.
| Salary sacrifice vs traditional company car | Salary sacrifice | Traditional company car |
|---|---|---|
| Vehicle choice | 200+ electric vehicles, new and used | Limited pool |
| Tax efficiency | BiK of 4% in 2026/27 on a zero-emission car, paid from pre-tax salary | BiK of up to 37% in 2026/27 on a high-emission petrol or diesel car |
| Typical saving | Employees typically save 20 to 50% compared with a personal lease | Standard BiK rates apply |
| Personal use | Included, subject to the annual mileage in your agreement | Often restricted |
| Mileage limits | Flexible options | Often stricter limits |
| Early termination | Protected | May incur fees |
| Insurance, maintenance and road tax | Included | Usually included |
Salary Sacrifice Company Car vs. Car Allowance
A car allowance is taxable cash added to your pay, and you arrange your own car, insurance and maintenance, whereas salary sacrifice pays for an all-inclusive car from pre-tax salary. At the 40% tax rate, £5,000 of gross salary sacrificed reduces take-home pay by around £3,000 before the BiK charge, because £2,000 of Income Tax is avoided. A £5,000 allowance is taxed, leaving around £3,000 for your own car, insurance, servicing and fuel.
| £5,000 car allowance vs £5,000 salary sacrifice (40% tax rate, illustrative) | Car allowance | Salary sacrifice |
|---|---|---|
| Gross amount | £5,000 | £5,000 |
| Income Tax | £2,000 payable | £2,000 avoided |
| Effect on take-home pay | Around £3,000 received | Take-home pay reduced by around £3,000 |
| What the money pays for | Around £3,000 towards your own car, insurance, servicing and fuel | £5,000 of car costs, with insurance, servicing and maintenance, breakdown cover and road tax included |
Excludes National Insurance and BiK tax. Illustrative only: your own figures depend on your salary and chosen car.
How Do You Set Up a Salary Sacrifice Company Car Scheme?
Setting up has two sides: the employee's application and the employer's launch.
How Do Employees Get a Salary Sacrifice Car?
Check your employer offers The Electric Car Scheme
Browse the vehicles available
Check exact costs with our salary sacrifice calculator
Speak with an EV specialist who will help you choose the right EV for your needs
Affordability: a personal credit check isn't usually required, although an affordability assessment may apply
Order your car and await delivery, typically 8 to 16 weeks
How Do Employers Launch a Salary Sacrifice Scheme?
Running a scheme has no net cost to the business, no setup fees and Complete Employer Protection from day one, and employers typically also reduce employer National Insurance on the salary sacrificed (15% above the £5,000 secondary threshold in 2026/27). Most launches follow four stages.
Step 1: Plan and Choose a Provider
Assess your existing employee benefits, sustainability commitments, salary brackets and commuting patterns, then compare providers on employer protection, vehicle range including used EVs, administrative support and charging solutions, including charging cost savings through The Charge Scheme. A business case built on sustainability, talent attraction and no net cost helps secure buy-in.
Step 2: Communicate with Employees
Explain how salary sacrifice works, the 4% BiK rate in 2026/27 and the practicalities of charging, addressing range anxiety directly. Information sessions and Q&As can include demonstrations of popular EVs, home-charging guidance and current EV drivers sharing their experience. The calculator, advice on choosing the best electric car, and guidance on charging without a driveway or at work build confidence.
Image source: Shutterstock
Step 3: Set Up Administration and Payroll
Configure payroll deductions and P11D reporting, and plan onboarding from application to delivery, covering insurance, maintenance and charging, along with procedures for scheme changes and early termination. The provider handles lease administration, including affordability checks and ongoing lease management, and a car allowance comparison helps employees see how the scheme fits alongside existing benefits.
Step 4: Launch, Monitor and Optimise
Start with selected departments or a volunteer group, using early adopter testimonials to build momentum. Track applications, completion rates, satisfaction and environmental impact, and share success stories with your workforce. As the scheme matures, extend it with used EVs and The Charge Scheme and integrate it with your other sustainable benefits. EV charging app guidance helps new drivers settle in.
Frequently Asked Questions About Company Car Salary Sacrifice
Does Salary Sacrifice Affect My Take-Home Pay?
Yes, but the tax savings offset part of the reduction. You pay less Income Tax and National Insurance, and the BiK charge on an electric car is 4% in 2026/27, so employees typically save 20 to 50% compared with a personal lease
Can I Use A Salary Sacrifice Company Car For Personal Use?
Yes. Personal use, including commuting, weekends and holidays, is included, subject to the annual mileage in your agreement.
What's Included In The Monthly Payment?
The payment covers the lease, comprehensive insurance, servicing and maintenance, breakdown cover and road tax (VED), with tyres and home charging optional. Charging costs sit outside it, but The Charge Scheme lets you pay for charging from pre-tax salary, saving 20 to 50% on charging costs.
How Does Home Charging Work?
A home charger can be included as an optional extra in your package, allowing overnight charging at typically cheaper off-peak rates. Without a driveway, you can use workplace or public charging, or explore other charging options.
What Happens At The End Of The Lease?
You can return the vehicle and choose a new one, extend the lease subject to availability or, where available, buy the car at market value.
Can I Salary Sacrifice If I Have A Variable Salary?
Yes, but it needs careful consideration. If you receive bonuses, commission or variable hours, discuss how variable pay and salary sacrifice work together with your provider.
What If I'm On Maternity Or Paternity Leave?
Your statutory maternity or paternity pay is protected and calculated on your pre-sacrifice salary, but you'll need to continue the payments. Some employers offer flexibility during parental leave, so discuss options with your HR department.
How Do Employers Launch A Salary Sacrifice Scheme?
Employers launch in four stages: plan and choose a provider, communicate, set up payroll and administration, then roll out in phases.
Is a Salary Sacrifice Company Car Right for You?
A salary sacrifice company car suits you if you want a new electric car, have stable employment and drive regularly, because the monthly payment includes everything and works out more economical than occasional car use. It's less suitable if you need maximum salary flexibility for a mortgage application, already own a car outright, have highly variable income, drive under 3,000 miles a year or prefer to build vehicle equity. The salary sacrifice calculator shows how the numbers work for your situation.
Getting Started with The Electric Car Scheme
The Electric Car Scheme was named Best Salary Sacrifice Provider 2025 by Car Sloth and is an award-winning B Corp. Employees typically save 20 to 50% compared with a personal lease on 200+ electric vehicles, with one monthly payment, no large upfront payment and Employee Life Event Support. It doesn’t cost employers anything to set up and they get Complete Employer Protection from day one.
Employees should check whether your employer offers The Electric Car Scheme, or share this guide, and browse the cars available to salary sacrifice.
Employers, make sure to book a demo to see how to implement a scheme at no net cost to the business. With a 4% BiK rate in 2026/27 (5% in 2027/28) and typical savings of 20 to 50%, a salary sacrifice company car is worth comparing against a personal lease.
Join UK’s Leading EV Salary Sacrifice Car Scheme
Book a 15 minute callYou might also like…
Last updated: 20/10/2026
Information and prices provided are accurate at the time of release and may be subject to change. Our pricing is based on data collected from The Electric Car Scheme quote tool. All final pricing is inclusive of VAT. All prices above are based on the following lease terms; Using a flat payment profile, 10,000 miles pa, 36 months, and are inclusive of Maintenance and Breakdown Cover. The Electric Car Scheme’s terms and conditions apply. All deals are subject to credit approval and availability. All deals are subject to excess mileage and damage charges. Prices are calculated based on the following tax saving assumptions; England & Wales, 40% tax rate. The Electric Car Scheme Limited provides services for the administration of your salary sacrifice employee benefits. The Electric Car Scheme Holdings Limited is a member of the BVRLA (10608), is authorised and regulated by the FCA under FRN 968270, is an Appointed Representative of Marshall Management Services Ltd under FRN 667174, and is a credit broker and not a lender or insurance provider.
Copyright and Image Usage: All images used on this website are either licensed for commercial use or used with express permission from the copyright holders, in compliance with UK and EU copyright law. We are committed to respecting intellectual property rights and maintaining full compliance with applicable regulations. If you have any questions or concerns regarding image usage or copyright matters, please contact us at marketing@electriccarscheme.com and we will address them promptly.
