1. What is Car Salary Sacrifice?

Car salary sacrifice is a UK scheme where employees give up part of their salary in exchange for a company car. This reduces taxable income, potentially lowering income tax and National Insurance contributions, but introduces Benefit-in-Kind (BIK) tax on the car.

2. How Does the Calculator Work?

The calculator uses the formula:

Where:

• Income Tax — Calculated based on UK tax bands after salary sacrifice
• National Insurance — Calculated on reduced salary
• BIK Tax — Based on car value and CO2 emissions percentage
• Sacrifice Savings — Reduction in tax and NI from lower salary

3. Understanding BIK Tax

Details: Benefit-in-Kind (BIK) tax is calculated as a percentage of the car's P11D value, determined by its CO2 emissions. Electric vehicles typically have the lowest BIK rates (e.g., 2% in 2025).

4. Using the Calculator

Tips: Enter your annual salary before sacrifice, the car's P11D value, the appropriate BIK percentage for the vehicle, and the amount you're sacrificing from your salary.

5. Frequently Asked Questions (FAQ)

Q1: Is salary sacrifice always beneficial?
A: Not always. While it reduces income tax and NI, the BIK tax may offset these savings depending on the car's value and emissions.

Q2: What's the current BIK rate for electric vehicles?
A: For 2025, EVs have a 2% BIK rate, making them particularly tax-efficient under salary sacrifice schemes.

Q3: Are there other costs besides BIK tax?
A: Yes, you may also need to consider insurance, maintenance, and any employer charges, though these are often included in the package.

Q4: Can I end a salary sacrifice agreement early?
A: This depends on your employer's policy. Early termination may result in tax liabilities for the remaining contract period.

Q5: How does this affect my pension?
A: Reducing your salary could affect pension contributions. Check with your pension provider about any potential impacts.