Salary Sacrifice or Company Car?

Happy driver in a green Mokka -e

Getting a car through your company or salary is an attractive benefit for employees, and it means employers keep their team safe and happy in a new car. 

But while both salary sacrifice and company cars result in an employee getting a car through their employer, they have several key differences. So which is better? 

What’s the difference between salary sacrifice schemes and a company car?

A company car is owned, leased, or subscribed via the company itself, and isn’t paid for by the employee.

Generally speaking, companies will either offer a “company car allowance” to their staff, which they can use to go and find a car of their choosing, or they’ll simply give a car to the employee that the business purchases themselves. If owned by the business, a company car is treated as a fixed asset, which can have several tax implications such as depreciation. They’re often offered to senior employees or those who spend a lot of time commuting or travelling between locations.

It’s also worth remembering a company car is a taxable benefit meaning (usually) your company car allowance is added to your salary, generally to your monthly pay. That means it’ll get taxed at the same rate as your salary, so you’ll have to pay Income Tax and National Insurance on the car allowance too.

Happy driver in a green Mokka -e

With salary sacrifice, all permanent employees are offered the chance to opt-in to the scheme if they would like an alternative, affordable method to driving an electric car.

Salary sacrifice is a scheme in the UK that allows employees to “sacrifice” some of their gross salary in return for a car. 

Instead of getting a car directly and paying it from post-tax pay, the cost of the car is taken from pre-tax pay which reduces the employee’s tax liability, and allows them to save around 30-60% of the cost (depending on their salary).

It also means the value of the car is treated as taxable due to BIK (benefit in kind). The BIK rate will be as low as 2% until at least the 24/25 tax year, making a salary sacrifice electric car a massive cost-saving benefit for both employee and employer. 

Happy driver in a green Mokka -e

Salary sacrifice explained

You can find out more about how a salary sacrifice scheme works by watching our video: 

What are the benefits of getting an electric car through salary sacrifice?

There are plenty of benefits to setting up an electric car salary sacrifice scheme, both for the employer and the employee.

For starters, although you do need to consider BIK tax, it’s very low for electric cars at the moment so you still end up saving money. 

Benefits for employers include:

  • Attract and retain the best talent your industry has to offer
  • Improve the environmental impact of your workforce
  • Enjoy the total convenience with elmo managing all payroll and HMRC admin
  • Avoid the risk and cost of early termination
  • Pay nothing extra – elmo’s fee for running the scheme is equal to the employer’s NI savings

Benefits for the employees include:

  • An all-inclusive package that includes insurance, vehicle excise duty, MOT, service, breakdown and more
  • Save as much as 60% on the cost of an electric car subscription
  • Choose from the largest range of subscription electric cars on the market (and get a newer car than you may have been able to afford buying outright)
  • Enjoy total flexibility by avoiding multi-year leases
  • Upgrade or change your EV whenever you like

These benefits are all on top of the fantastic benefits experienced by electric car drivers, including attractive savings on fuel costs, congestion charges, and more.

Women getting into a black Peugeot e-2008

Our Salary Sacrifice calculator

With all this talk about pre-and-post tax pay, it can be a little confusing to work out how much you could save by getting an EV through salary sacrifice.

Don’t fear, though, because we’ve done the hard work for you through our salary sacrifice calculator below. Just enter your salary, the car you’d like to subscribe to and we’ll tell you how much both you and your employer could save.

Ready to find out more about Salary Sacrifice?

Fill out our short form and our Salary Sacrifice team will contact you with more information about our scheme and how it could benefit you.

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