Salary Sacrifice





What is Salary Sacrifice?


It’s a scheme that enables your employees to ‘sacrifice’ some of their salary in return for a brand-new company leased car. Because the sacrifice is a deduction from an employee’s gross salary, cost savings are made on income tax and National Insurance, making the cost of leasing a car cheaper than leasing the same vehicle on a Personal Contract Hire agreement. Benefits are increased significantly for both parties if the vehicle leased is electric.

Benefits for your business

Savings for your company


Savings are made via lower National Insurance contributions and reclaiming VAT on the rental - 50% of VAT payable on lease element of rental & 100% of VAT payable on service element of rental can be reclaimed.*

No cost to your business


There are no set-up fees and the scheme is cost neutral to your business. All employee savings are retained by the employee.

We manage the whole process


From initial set up including credit application and finance agreement, vehicle quotation and order, employee contribution calculations, vehicle delivery and employee in-life support.

Suitable for all employees


Regardless of their status or need for a company car within the business, so long as the individual’s salary is at least the national minimum wage after any deductions.

Tailored for your business


The scheme can be tailored to your company’s requirements, for example limiting employee choice to only low or zero emission vehicles, size or type of vehicle or contract length.

Electric vehicles



When electric vehicles are chosen it will assist your green agenda and help to deliver on your Environmental, Social, and Governance (ESG) and CorporateSocial Responsibility (CSR).

Grey fleet reduction


The scheme assists with duty of care and health & safety inthe management of grey fleets (employees using their own vehicles for business purposes).

Vehicles are transferrable


If an employee leaves the company, their lease vehicle can be transferred to the employees new employer or to another employee in your company, subject to eligibility critera.*

Salary Sacrifice Example

MG 4 Hatchback 125kW SE EV 51kWh 5dr Auto

20% Tax Payer

Gross Monthly Salary Sacrifice £433.68 per month
Employee Income Tax Saving £86.74 per month
Employee National Insurance Saving £52.04 per month
Benefit in Kind Payable by Employee £9.16 per month
Estimated Net Salary Reduction £304.06 per month

40% Tax Payer

Gross Monthly Salary Sacrifice £433.68 per month
Employee Income Tax Saving £173.47 per month
Employee National Insurance Saving £8.67 per month
Benefit in Kind Payable by Employee £18.32 per month
Estimated Net Salary Reduction £269.86 per month

The indicative figures shown above are based on the following parameters:

Contract Length - 36 months

Annual Mileage - 10,000

Leasing Company Maintained (routine servicing, tyres, MOT's and breakdowns)

The examples above should only be used as a guide, bespoke prices can be provided upon request.

Benefits for your staff

One set monthly salary deduction, includes:


  • Significant savings compared to retail alternatives
  • Vehicle servicing and maintenance
  • Tyre replacement due to wear & tear
  • Roadside assistance in the event of a breakdown
  • Road fund licence

Tax & NI savings


Because payment is taken from the employee’s gross salary via payroll, they benefit from Tax and National Insurance savings (typically 30- 40% savings for an electric vehicle) making the rental substantially less than a Personal Contract Hire (PCH) agreement.

No company car tax


The vehicle is classed as a benefit rather than as a “company car” by HMRC, therefore only Benefit in Kind (BIK) is payable by the employee rather than the vehicle being subject to company car tax rules. BIK rates on an electric car for 2021/22 are 1%, rising to 2% in 2022/23 & held at this rate for a further two years.

How do your employees order their vehicle?



The employee selects their vehicle, obtains quote(s) and their salary deductions are calculated.



The company and the employee provide confirmation of the order and the employee signs the addendum to their employment contract.



The vehicle is ordered through a manufacturer authorised dealership and estimated delivery date provided to employee.



You sign the vehicle lease agreement and direct debit for lease payments.



The vehicle is delivered and salary deductions commence.



The employee is provided with contact details to assist with any queries such as parking permits, foreign travel and vehicle maintenance.

Get in touch

If you'd like more information on Salary Sacrifice, please contact the Key2Lease team on 01522 440440 or