1. What is Salary Sacrifice?

Salary sacrifice is an arrangement where an employee gives up part of their salary in exchange for a non-cash benefit, such as a company car. This can reduce income tax and National Insurance contributions.

2. How Does Salary Sacrifice Work?

The salary sacrifice calculation follows this formula:

Where:

• \( Gross\ Pay \) — Your annual salary before deductions
• \( Income\ Tax \) — Calculated based on your tax band
• \( National\ Insurance \) — Employee National Insurance contributions
• \( Car\ Salary\ Sacrifice \) — The cost of your company car lease

Explanation: By sacrificing part of your salary for a car, you pay less income tax and National Insurance on the sacrificed amount.

3. Benefits of Car Salary Sacrifice

Details: Car salary sacrifice schemes can provide significant savings, typically including maintenance, insurance, road tax, and breakdown cover in one monthly payment.

4. Using the Calculator

Tips: Enter your gross annual salary, estimated income tax, National Insurance contributions, and the cost of your car salary sacrifice. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: How much can I save with salary sacrifice?
A: Savings vary but typically range from 30-60% compared to personal leasing, due to tax and NI savings.

Q2: Does salary sacrifice affect my pension?
A: It can, as your pension contributions are based on your reduced salary. Check with your employer about pension protection.

Q3: What happens if I leave my job?
A: You typically have to return the car, though some schemes offer options to continue the lease privately.

Q4: Are electric cars better for salary sacrifice?
A: Yes, electric cars have additional tax benefits with lower Benefit-in-Kind (BIK) rates.

Q5: Can I get more than one car through salary sacrifice?
A: Usually no, most schemes allow one car per employee, but policies vary by employer.