4 key questions answered on salary sacrifice

Launching a Salary Sacrifice car scheme is a great benefit for your employees, and has plenty of benefits for employers too – lowering tax bills, employee retention, and helping reduce your company’s carbon emissions too, as you can offer affordable access to electric vehicles (EVs) to all employees.

How does Salary Sacrifice work?

If you enter into a salary sacrifice agreement, you are agreeing to give up part of your gross salary (i.e. before tax) in exchange for a non-cash benefit – which can be anything from childcare vouchers to bicycles and cars. Because your car scheme contribution is taken on your gross salary, your tax and National Insurance calculations are taken on a smaller amount – meaning you’ll pay less tax!

Salary Sacrifice car schemes generally include insurance, maintenance, road tax, and servicing bundled into one amount – so your monthly contribution will cover everything to keep your car on the road, and you won’t have any unexpected bills.

What happens to my Salary Sacrifice scheme if I leave early or go on maternity leave?

Unlike many other traditional car schemes, Tusker minimises risk for both employers and employees, with a full suite of protections available in the case of redundancy, maternity, long-term sickness cover as well as several other lifestyle events, so neither party is penalised in the event of unforeseen circumstances.

If you’re part of a Tusker salary sacrifice car scheme and this applies to you, get in touch with us on 0333 400 2020.

What is Benefit in Kind tax increasing to?

When you choose a car through a Salary Sacrifice scheme, you’ll incur Benefit in Kind (BIK) tax, as it’s treated as a taxable benefit. The amount you pay depends on the emissions of car you choose, your salary tax band, and the value of the car.

For electric cars, BIK is currently 3% (2025/26), rising by 1% each year until April 2028, where it will increase by 2% each year before reaching 9% in the 2029/30 financial year. While this is increasing, it’s still below Plug-In Hybrids (6%, in 2025/26, rising to 12% in 2029/30), and other hybrids, which are set to hit 21% in 2029/30 (currently at 15%).

Petrol and diesel cars, on the other hand, are banded by their CO2 emissions per kilometre, which will be as high as 39% in 2029/30 (currently at 37%) for the most polluting cars.

Is Salary Sacrifice replacing company car schemes?

For some employers, the complexities of company car schemes, combined with their limited audience, means that salary sacrifice is a good alternative for them. It opens the benefit up to a wider audience beyond perk drivers and management, and often provides a wider range of cars for drivers to choose from. It also works well for cash allowance drivers. Read more here.

Company cars remain popular for those who drive on a regular basis for business purposes.

What should I look for in a Salary Sacrifice car scheme?

You should look for a Salary Sacrifice scheme that covers all of your needs, including:

• No upfront deposit
• Flexibility for parental leave or other long-term absence
• Bundled costs for maintenance, insurance, tyres, and other running costs
• A wide range of cars available with plenty of models available for fast turnaround