How does salary sacrifice work for a car?

Salary sacrifice is a great benefit businesses can offer their employees. It helps employees drive a brand-new car in a way that’s more affordable, convenient and flexible than buying or leasing.

But how does salary sacrifice work for a car and what are the benefits? Is it too good to be true, or should it be something you seriously consider if you’re in the market for a new car?

In this post, we’re going to explore how salary sacrifice works, including the benefits for employers and employees, and how it can save you money on tax.


Two photos showing a man driving a Polestar and a photo of the Polestar from front angle parked on a road

What is a salary sacrifice car scheme?

A salary sacrifice scheme allows you to pay for something using your monthly salary before you’ve paid your tax. So, a car scheme enables you to save money by paying less tax and receiving benefit-in-kind discounts so you pay up to 60% less than you might ordinarily.

While you will receive a brand-new car and pay much less, it’s important to note that these deductions mean you’ll also bring home less each month. For that reason, it’s vital to make sure you can still afford your other monthly payments, such as rent/mortgage, council tax, utilities, phone bill and food even after these deductions have been made.

For more information read our post on how salary sacrifice works.

How does salary sacrifice work for electric cars?

A salary sacrifice electric car scheme works in the same way as it does for an internal combustion engine (ICE) vehicle, however, the benefits of an electric car outweigh the benefits of similar schemes for petrol and diesel cars. Not only does a salary sacrifice scheme make affording the car itself more achievable for more employees, but EVs are also cheaper to run and maintain than their ICE counterparts.

At elmo, we offer an all-inclusive EV scheme that not only provides you with the car, but everything else you need to drive it, including tax, insurance, MOT, servicing and breakdown cover.

Benefits for employees

The benefits of an electric car salary sacrifice scheme for employees include:

  • Up to 60% off the cost of an electric car subscription
  • With an all-inclusive package, you know exactly how much you’ll pay every month
  • Save an additional 30-60% off the cost of using public charging stations with elmoCharge, making affordable running costs even more affordable
  • Choose from a large range of electric cars
  • Complete flexibility, including switching your EV for a different make or model

Read the complete employee guide.

Benefits for employers

The benefits of an EV salary sacrifice scheme aren’t exclusive to employees. There are also plenty of benefits for employers too:

  • Offer an attractive non-cash benefit at zero net cost to your business
  • Attract and retain top industry talent
  • Improves your organisation’s impact on the environment
  • Minimal admin, payroll and HMRC processes

Read the complete employer guide.

Does salary sacrifice save you money on tax?

Yes, by sacrificing some of your pre-taxed earnings, you reduce your tax liability, which means you only pay tax on the earnings you make once the deductions have been taken into account. That means you’ll pay less in tax but have more to show for it, in the form of a brand-new electric car.

Is salary sacrifice worth it?

Whether or not salary sacrifice is worth it for you depends entirely on you, your financial situation and whether or not you’ll have enough money to cover your usual monthly bills and expenses.

The last thing you’ll want is to put yourself in a difficult situation by not having much wiggle room in your monthly earnings after the salary sacrifice deductions. Salary sacrifice helps your income go much further, but it shouldn’t be to the detriment of your other commitments. After receiving your EV and taking a look at your first payslip with the deductions included, you won’t want to put yourself in a difficult position.

We’ve put together a handy list of all the pros and cons of salary sacrifice schemes for EVs which might be a useful read if you’re on the fence.

Sign up for a salary sacrifice scheme today

Are you an employer looking to offer this super-desirable, money-saving perk to your workforce? With elmo, employees choose from a wide range of all-inclusive EVs which are delivered to their door in as little as seven days. Read our guide to salary sacrifice or contact us today for more information.


What happens when an employee leaves?

Through elmo, after the first 30 days of the subscription employees are free to make changes to their contract, giving us 30 days’ notice. This also includes if the employee leaves the business for any reason. Read our guide to early terminations for more info.

How much do you save on car salary sacrifice?

The amount you save with a car salary sacrifice scheme depends on your earnings and the choice of car you sign up for. You’ll save between 30% and 60% of the standard subscription cost. Use our ev savings calculator to see exactly how much you could save. 

What cars are available on salary sacrifice?

The cars available via salary sacrifice depend on the range offered by the provider. Here at elmo, we have one of the widest ranges of EVs available through salary sacrifice.

Is salary sacrifice better than a company car?

Through salary sacrifice, employees pay for their own car, whereas a company car is paid for by your company. A company car is often seen as a more desirable perk as the employee doesn’t pay for it themselves.

Someone smiling in their Polestar 2

elmo’s salary sacrifice scheme

Whether you’re an employer or employee, find out more about elmo’s salary sacrifice scheme. 

Tesla Model 3 front angle

What is Benefit-in-Kind tax?

Find out about BiK tax, why you have to pay it and how much you might have to contribute.