A salary sacrifice car scheme is an employee benefit that allows staff to lease a new car by giving up a portion of their gross salary. The payment is made before tax and National Insurance are deducted, making it a cost-effective way to drive a brand-new vehicle. The lease typically includes maintenance, insurance, road tax, breakdown cover, and servicing in one fixed monthly cost. This means both the employer and employee benefit from tax and NI savings, and the employee gains a hassle-free motoring experience.

From an employer's perspective, salary sacrifice is straightforward to implement and can help reduce National Insurance contributions. The business leases the vehicle through Silverstone Leasing and deducts the lease cost from the employee’s gross salary each month. The scheme can enhance your employee benefits offering, support your sustainability goals by encouraging the uptake of electric vehicles, and require minimal administration thanks to our fully managed service. It's also cash-flow friendly since there is no need for capital expenditure or upfront payments.

Employees benefit by accessing a brand-new car, often an electric or hybrid model, at a lower cost than through traditional personal leasing. Because payments are taken before tax and National Insurance, the employee saves money on each deduction. For electric vehicles, where Benefit-in-Kind (BiK) tax rates are very low (currently just 2% for most EVs), the savings can be substantial. The all-inclusive nature of the scheme—covering insurance, maintenance, servicing, and breakdown cover—also provides peace of mind and simplifies budgeting.

Most salary sacrifice schemes focus on electric and ultra-low-emission vehicles because of the tax benefits, but a wide range of vehicles is available through Silverstone Leasing. From compact hatchbacks to SUVs and even premium brands, you can tailor your scheme to include models that suit your workforce. We provide expert advice on selecting the best options to balance value, environmental impact, and driver appeal.

To be eligible, employees must be paid under the PAYE system and earn above the National Minimum Wage after the salary deduction is applied. The scheme is best suited for employees who are not planning significant changes to their employment status during the lease term (e.g. maternity leave or switching jobs), as the agreement typically runs for two to four years. Employers will also need to ensure employees meet any additional criteria set by the leasing or finance provider, such as a satisfactory credit check.

Like any financial agreement, salary sacrifice has considerations. If an employee leaves the business or is made redundant during the lease term, the employer may be liable for the remaining payments. However, many schemes include early termination protection or gap insurance to reduce this risk. Additionally, the employee's statutory benefits, such as pensions or life cover, may be affected if based on their post-sacrifice salary, so it's important to assess these implications in advance. Silverstone Leasing provides support in helping both businesses and employees understand the risks and build protections into the agreement.

Tax is calculated on the car’s Benefit-in-Kind (BiK) value, which is based on its CO₂ emissions, P11D value, and fuel type. For electric vehicles, the BiK rate is extremely low (2% as of 2025), which means the additional tax the employee pays on the car as a benefit is minimal. Because the salary deduction happens before tax and National Insurance, the employee pays less of both, and the employer saves on their NI contributions. Silverstone Leasing helps businesses calculate these tax benefits in real terms to understand the savings available.

If an employee leaves the company during the lease agreement—whether due to resignation, redundancy, or dismissal—the employer may be liable for any outstanding lease payments. To manage this risk, many salary sacrifice schemes include early termination insurance or built-in protection plans. It’s essential to have a clear policy in place from the start and communicate it to employees. Silverstone Leasing works with you to create a scheme that minimises risk and includes safety nets where needed.

Most salary sacrifice lease agreements run for 24, 36, or 48 months, depending on the needs of the employer and employee. During this time, the monthly payment remains fixed, and the vehicle remains fully maintained under the terms of the lease. At the end of the agreement, the car is returned, and the employee may choose to enter a new agreement with a different vehicle. Silverstone Leasing offers flexible terms and support to help manage renewals and end-of-contract processes smoothly. 

Setting up a salary sacrifice scheme with Silverstone Leasing is simple. Our expert team will guide you through every stage, from designing a scheme that suits your workforce to providing all necessary documentation, employee communication, and ongoing support. We handle the vehicle procurement, lease agreements, delivery, and management, so you can focus on running your business. To get started, contact our team for a consultation and we’ll help you build a cost-effective, employee-friendly benefit scheme that adds value from day one.