1. What is Salary Sacrifice Car Savings?

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. The savings come from reduced income tax and National Insurance contributions.

2. How Does the Calculator Work?

The calculator uses the salary sacrifice formula:

Where:

• Car Sacrifice Amount — The amount of salary being sacrificed (GBP)
• Tax Rate — Your marginal income tax rate (decimal)
• NI Rate — Your National Insurance rate (decimal)
• BIK Tax — Benefit-in-Kind tax for the car (GBP)

Explanation: The equation calculates tax and NI savings from reducing your salary, then subtracts the BIK tax you'll need to pay for the company car.

3. Importance of Salary Sacrifice Calculation

Details: Calculating potential savings helps determine whether a salary sacrifice car scheme makes financial sense for your situation.

4. Using the Calculator

Tips: Enter all values in GBP. Tax and NI rates should be in decimal form (e.g., 20% = 0.20). BIK tax depends on the car's P11D value and CO2 emissions.

5. Frequently Asked Questions (FAQ)

Q1: What is Benefit-in-Kind (BIK) tax?
A: BIK is a tax on company benefits, including company cars. It's based on the car's P11D value, CO2 emissions, and your income tax band.

Q2: Are there other costs to consider?
A: Yes, consider potential impact on pension contributions, mortgage applications, and other salary-linked benefits.

Q3: Who is salary sacrifice best suited for?
A: Typically higher-rate taxpayers who do high mileage in low-emission vehicles benefit most.

Q4: Are electric vehicles treated differently?
A: Yes, electric vehicles currently have very low BIK rates, making them particularly attractive for salary sacrifice schemes.

Q5: Can I opt out of a salary sacrifice scheme?
A: This depends on your employer's scheme rules, but most allow opt-out with notice, though there may be penalties.