Can I get a salary sacrifice car if I'm below the basic rate threshold?

You can still access a salary sacrifice car scheme if your salary allows. However, if the sacrifice reduces your pay below the National Living Wage (£12.21/hour from April 2025 for those aged 21+), your employer cannot proceed. Always check the post-sacrifice salary doesn't breach NMW rules.

Does salary sacrifice affect employer National Insurance on the car?

Yes. The employer pays Class 1A NI on the BIK value (15% from April 2025). However, the employer also saves 15% employer NI on the salary reduction. For EVs with very low BIK values, employer NI savings from the salary sacrifice typically far exceed the Class 1A NI liability, so many employers pass savings to employees.

What is included in the car list price for BIK purposes?

The list price includes the manufacturer's published UK list price including VAT, delivery charges, and the cost of any factory-fitted optional extras. It does not include the cost of a private number plate. Government grants (e.g. the EV grant) reduce the list price for BIK calculations.

Are salary sacrifice cars available for used/second-hand vehicles?

Salary sacrifice schemes are generally offered on new vehicles since BIK is calculated on the original list price for the first time the car is registered. Some schemes offer nearly-new or approved-used EVs. Check with your employer's fleet provider for what's available.

Does salary sacrifice a car affect my mortgage application?

Yes — salary sacrifice reduces your contractual gross salary, which most mortgage lenders use for affordability assessment. This could reduce your maximum borrowing amount. If you are planning to apply for a mortgage, consider whether the car tax savings outweigh the potential reduction in mortgage affordability.

What happens at the end of a salary sacrifice car agreement?

Most salary sacrifice car agreements run for 2-4 years. At the end, you typically return the car and can choose a new one. Some schemes offer the option to purchase the car at a market value or balloon payment. Check the specific terms with your employer's scheme provider.

Can I salary sacrifice a car if I'm a company director?

Sole directors of their own limited company typically cannot benefit from salary sacrifice in the traditional sense since there is no employment contract separation. However, directors of larger companies with a standard employment contract can use salary sacrifice car schemes like any other employee.

What CO2 band applies to mild hybrid and plug-in hybrid vehicles?

Plug-in hybrids with a fully electric range over 130 miles attract a 5% BIK rate in 2025/26. Those with a range of 70-129 miles face 8%, 40-69 miles face 12%, and under 40 miles follow standard CO2-based rates. Mild hybrids (no external charging) are treated as standard petrol/diesel cars and use the CO2 emissions-based BIK rate table.

Is insurance and maintenance included in salary sacrifice car payments?

Most salary sacrifice car schemes are fully comprehensive packages that include insurance, maintenance, tyres, breakdown cover, and road tax within the monthly sacrifice amount. This makes budgeting easier and means the whole package is subject to BIK — not just the car itself.

How does salary sacrifice car saving compare to a personal car lease?

For electric cars, salary sacrifice is almost always more cost-effective than a personal lease. A basic rate taxpayer saves 20% income tax + 8% NI = 28% on the sacrifice amount, while only paying a 3% BIK rate on the list price. For a £30,000 EV, the annual BIK tax is just £180 (basic rate), making the net saving from salary sacrifice far exceed the BIK cost.

Salary Sacrifice Car Calculator 2025/26

Calculate Your Salary Sacrifice Car Saving

Enter your salary, car details and monthly sacrifice amount to see exactly how much you save — and what the car actually costs you after all tax benefits.

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Tax Band

Your Salary Sacrifice Car Analysis

Based on 2025/26 BIK rates and tax thresholds. Estimates only.

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Annual BIK Value

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BIK Income Tax Cost

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Salary Sacrifice Tax Saving

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NI Saving (Employee)

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Employer NI Saving

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Net Annual Saving

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Annual Gross Sacrifice

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Effective Monthly Car Cost

BIK Rate Applied

How Salary Sacrifice Car Schemes Work

A salary sacrifice car scheme lets you drive a new car — usually an electric vehicle — in exchange for giving up part of your gross salary. Because the sacrifice happens before tax and NI, you save money on both. The key trade-off is the Benefit in Kind (BIK) tax you pay for having access to a company car.

Why EVs Make Salary Sacrifice So Attractive

EV BIK rate 2025/26: just 3% — rising to 4% in 2026/27, 5% in 2027/28, 6% in 2028/29
Compare this to a petrol car with 130g/km CO2: 28% BIK rate
For a £35,000 EV: BIK value = £1,050 → BIK tax = £210/year (basic rate)
The salary sacrifice tax saving is typically 10–20× larger than the BIK cost

Example — £45,000 salary, £35,000 EV, £600/month sacrifice:
Annual sacrifice: £7,200 | Tax saved (20%): £1,440 | NI saved (8%): £576
BIK tax (3% × £35,000 × 20%): £210 | Net saving: £1,806/year
Effective monthly cost: £450 instead of £600 gross — you pay just 75p in the pound

2025/26 BIK Rates by CO2 Band

CO2 (g/km)	BIK Rate 2025/26	BIK Rate 2026/27
0 (Electric)	3%	4%
1–50 (PHEV >130mi range)	5%	6%
1–50 (PHEV 70–129mi range)	8%	9%
1–50 (PHEV 40–69mi range)	12%	13%
51–75	14%	15%
76–94	17%	18%
95–99	19%	20%
100–104	20%	21%
125–129	25%	26%
160+ (high CO2)	37%	37%

Frequently Asked Questions

What is the BIK rate for electric cars in 2025/26?

The Benefit in Kind (BIK) rate for fully electric cars (0g/km CO2) is 3% for 2025/26. This rises by 1% per year to 4% in 2026/27, 5% in 2027/28, and 6% in 2028/29. This compares extremely favourably to petrol or diesel cars, which attract BIK rates of 20–37%.

How is my BIK tax calculated?

BIK tax = car list price × BIK rate% × your income tax rate. For example, a £30,000 EV at 3% BIK gives a BIK value of £900. If you are a basic rate (20%) taxpayer, the annual BIK tax is just £180. A higher rate (40%) taxpayer pays £360/year BIK tax — still very low compared to the savings from salary sacrifice.

Does salary sacrifice affect my mortgage?

Yes — salary sacrifice reduces your contractual gross salary, which most mortgage lenders use for affordability assessment. If you are planning to apply for a mortgage, consider whether the car tax savings outweigh the potential reduction in mortgage borrowing capacity.

What CO2 rate applies to plug-in hybrids?

PHEVs with a fully electric range over 130 miles attract a 5% BIK rate in 2025/26. Those with 70–129 miles range face 8%, 40–69 miles face 12%, and under 40 miles use standard CO2-based rates. Mild hybrids are treated as petrol/diesel and use the CO2 band table.

Can I salary sacrifice a car if I earn near minimum wage?

If the sacrifice would reduce your pay below the National Living Wage (£12.21/hour for those aged 21+ from April 2025), your employer legally cannot proceed with the arrangement. At lower salaries, the tax savings are also smaller, so check whether it still makes financial sense.

What does the monthly sacrifice amount include?

Most salary sacrifice car schemes are fully comprehensive packages. The monthly amount typically includes the car lease, insurance, maintenance, tyres, breakdown cover, and road tax. The full amount is subject to BIK tax — not just the car element. Always confirm the exact package contents with your employer's fleet provider.

How does employer NI saving work in salary sacrifice?

Employers save 15% NI (from April 2025) on salary they no longer pay. The employer also pays Class 1A NI on the BIK value (15% of BIK value). For EVs with a 3% BIK rate, the employer's Class 1A liability is tiny compared to their NI saving — so many employers pass savings to employees as a better deal or additional contributions.

What happens if I leave my employer mid-agreement?

If you leave your employer during a salary sacrifice car agreement, you will typically need to either return the car immediately or take over the lease payments personally at a higher rate. Some schemes include early termination clauses that can be costly. Always check the contract terms before committing to a salary sacrifice car arrangement.

Are personal contract purchase (PCP) cars eligible for salary sacrifice?

Salary sacrifice car schemes are typically structured as operating leases (similar to contract hire), not PCP agreements. At the end of the term, you return the car. If you want to own the car, a PCP through personal finance is a different arrangement and does not benefit from salary sacrifice tax advantages.

Is the BIK rate locked in when I start the scheme?

For cars registered from 6 April 2020, the BIK rate is not locked in at the start of the agreement — it changes each tax year in line with HMRC's published rates. This means as the EV BIK rate rises from 3% to 4% to 5% in coming years, your BIK tax will increase slightly, though it remains far below the rates for petrol or diesel vehicles.

Can salary sacrifice car schemes be used for vans?

Yes — vans can be provided through salary sacrifice, but the BIK rules differ. A company van with private use has a fixed BIK value (£3,960 for 2025/26) rather than being percentage-based on list price. Fully electric vans have a £0 BIK for 2025/26. Check the specific rules with your employer and a tax adviser.

How does salary sacrifice compare to a personal EV lease?

For electric cars, salary sacrifice is almost always more cost-effective than a personal lease. A basic rate taxpayer saves 20% income tax + 8% NI = 28% on the sacrifice, while only paying 3% BIK on the list price annually. The effective monthly cost is significantly lower through salary sacrifice than paying for the same car personally from net pay.

Mustafa Bilgic
Financial Content Writer | Tax & Benefits Specialist
Updated: 10 March 2026 | Published: 1 January 2025