Is an electric car on salary sacrifice too good to be true?

Short answer: no.

But you probably want something more reassuring than that. So let’s go.

If you were to lease an electric car out of your taxed income – that’s what ends up in your bank account each month after deductions for income tax and National Insurance – it will cost you more than if you were to lease the very same car through salary sacrifice.

It does sound too good to be true, but really it’s not.

Salary sacrifice takes advantage of a range of tax breaks to provide you with an electric car through your employer.

It will be your employer who leases the car on your behalf (so there’s no impact on your personal credit score), the car will be fully insured (with insurance costs increasing that’s a bonus) and fully maintained (in other words, all servicing and tyre replacements, for example, are taken care of). All you need to do is add the electricity.

So what are these tax breaks that make salary sacrifice so appealing?

You chose a car that suits your needs from a special portal provided by Fleet Alliance for your employer.

The monthly rental of the car is then deducted from your gross salary. Why is this important? Because it reduces your taxable income and the amount of National Insurance you pay based on that income.

You have to account for benefit in kind taxation company car tax because salary sacrifice is a benefit. But the tax is so low it doesn’t outweigh the other advantages of the reduced gross salary. As an example, the company car tax on an electric MINI is as little as £10 a month in the 2024/25 tax year. And don’t worry, it only increases to £15 a month in the 2025/26 tax year.

And just to reassure you, here’s an example of how good salary sacrifice can be for you

Let’s take the Renault Scenic as an example. This good looking family SUV estate car has a range of 260 miles, so good enough for most daily drives and sufficient for longer journeys. Here are the figures below, with salary sacrifice on the left and if you were to lease the same car on a personal contract hire agreement (PCH) on the right:

Renault Scenic E-Tech 125kW Techno
60kWh Comfort Range 5dr Auto

Based on 3 year/5,000 miles pa (3+33 profile), 40% tax payer

As you can see, the saving on salary sacrifice is substantial – more than £305 a month, or over the length of the contract a staggering £10,980.

So is salary sacrifice too good to be true? Well, it seems like it given the significant savings – but in actual fact salary sacrifice makes sound financial sense. You should give it a go.

Book a call with our salary sacrifice experts today.