Is a company car still worth it in 2025?

Having a company car has always been considered a desirable benefit to have. Nowadays, it’s still a great benefit, but the way people access cars through work has also evolved.

Traditional company cars remain popular for those who drive regularly for business, but the rise of salary sacrifice car schemes has opened up affordable, cost effective driving to a much wider range of employees, including those who don’t need a car for work every day or who cover lower mileages either personally or on company business.

So, is a company car still worth it in 2025? Or could salary sacrifice offer better value for you or your team?

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

A company car is typically provided by your employer for both business and personal use. You don’t own the vehicle, but you can use it privately, and you’ll pay tax on it through something called Benefit in Kind (BiK).

A salary sacrifice car, on the other hand, is part of an employee benefit scheme. You ‘sacrifice’ a small portion of your gross salary each month in exchange for a brand-new car, with insurance, servicing, tyres, and maintenance all included.

Salary sacrifice schemes are becoming increasingly popular because they’re flexible, cost-effective, and open to all eligible employees. anyone on the payroll can usually take part, as long as they earn enough to remain above National Minimum Wage after the monthly salary sacrifice for the car is reduced from their salary

How is a company car taxed?

Company cars  and cars provided through a salary sacrifice scheme are subject to a tax called ‘Benefit in Kind’, which is – as you may expect – a tax that’s paid on a benefit you receive in lieu of payment.   However with the salary sacrifice arrangement, the individual tax and NI savings available can offset the BiK payable.

It’s calculated using the vehicle’s P11D value, the BiK rate for the car, and your tax bracket. The BiK rate will vary depending on what car you go for – the rate for an electric car is only 3% (2025/2026 Tax Year), whereas a petrol or diesel car can go as high as 37%!

So your car is an EV (taxed at 3% in the current Tax Year) with a P11D value of £35,000, and you’re a 40% taxpayer, you’ll pay around £7.35 per month in BiK tax. For 20% taxpayers, it’s even lower.

On the other hand, the same example for a petrol car (taxed at up to 37%) with a P11D value of £35,000, you’d be paying just under £61 per month in BiK tax.

Is it better to have an electric company car?

Having an EV as a company car can save you money in a few different ways:

• Low BiK rates: From April 2025, fully electric cars are taxed at just 3% – substantially lower than petrol or diesel cars, which are taxed at 37%! This is rising steadily over the next few years but will still remain significantly lower in 2029 (9%).
• Lower running costs: An EV will cost you between 7-11p per mile, and a petrol car will cost 13-17p. If you’re doing a lot of miles, this will add up quickly!

Why salary sacrifice is a good option.

• No upfront costs: Unlike some other car finance schemes, you don’t need to pay a deposit with Salary Sacrifice.
• Tax and NI savings: With Salary Sacrifice, your contribution is made from your gross salary, meaning your taxable income is reduced, and you pay less tax and national insurance (if you choose car with emissions of 75g/km or below).
• Fixed monthly cost: Imagine a world where you don’t have to budget for extra unknown costs, because your tax, MOT, maintenance and insurance is all due. With salary sacrifice, there’s only one amount that comes out of your salary and the services are all included.

Who does salary sacrifice benefit most?

Salary sacrifice schemes offer great value for both employees and employers:

• Employees in all tax brackets can benefit most from tax and national insurance savings if they choose a car with emissions of 75g/km or below.
• Employers reduce Class 1A NIC exposure and enhance their benefits package.
• Regular drivers see great value from reduced EV running costs.
• Companies can reduce their emissions and meet sustainability targets by offering EVs to their staff.

Because salary sacrifice is open to a wider range of staff, it’s increasingly seen as a flexible, inclusive, and sustainable alternative to traditional company cars.

Conclusion: Yes, company cars still work especially for higher mileage drivers – but salary sacrifice might suit you better

Far from being obsolete, the company car benefit remains a compelling and cost-efficient benefit in 2025. However, we recommend looking at your (or your employees) individual circumstances, as a salary sacrifice car scheme may work better for them.

With very low BiK charges for EVs, tax and national insurance savings, and bundled maintenance, it can often outperform traditional company cars and allows employees to maximise their cash allowances prior to Tax and NI being taken.