The best of both worlds: Getting into a salary sacrifice car with your cash allowance

Why convert your cash allowance into a salary sacrifice car?

With the growing trend of employers offering cash allowances in place of traditional company cars, particularly as vehicle access becomes increasingly limited to senior staff, drivers are discovering new ways to get behind the wheel of the vehicle they really want. Pairing a cash allowance with a car salary sacrifice scheme gives employees the best of both worlds: greater choice, cost savings, and a fully maintained vehicle with minimal hassle.

A cash allowance gives you a fixed amount as an element of salary from your employer to spend on a car. By using it through a salary sacrifice scheme, you can make your money go further with lower tax and National Insurance, and access to a brand-new electric car for a single monthly amount.

What car options are available with a cash allowance?

A cash allowance enables you to have the freedom to choose any car you’d like to use for work purposes. So, you could buy a car outright, lease through a private arrangement, or use your employer’s car salary sacrifice scheme as a benefit of employment.

However, salary sacrifice car schemes can often deliver the biggest savings… especially on electric vehicles.

Why salary sacrifice can be the smarter move

When using your cash allowance through salary sacrifice, there are two major advantages. First, you get to choose a zero-emission electric vehicle that benefits from just 3% Benefit in Kind tax (from April 2025), making it one of the most tax-efficient ways to drive a new car.

Second, you simplify your car costs. Car salary sacrifice schemes offer a similar all-in package to traditional company cars, meaning you can enjoy worry free driving without the usual admin or unexpected bills.

Reducing grey fleet risk

One of the growing challenges for businesses is managing grey fleet risk (employees driving their own vehicles for work). But combining a cash allowance with a salary sacrifice scheme provides a neat solution. It ensures employees have safe, well-maintained vehicles that meet company standards, while also keeping costs predictable for the business.

In conclusion

Using a cash allowance to get a car through salary sacrifice can be a smart financial move for employees, especially those who drive for work. By effectively reducing your taxable income through taking a car on salary sacrifice, you can enjoy tax and NI savings, while also having the convenience and cost savings that come with choosing an EV.