Your employer leases the car, deducts the cost from your gross salary (saving you tax and NI), and you pay a tiny benefit-in-kind charge — currently just 3% of list price. The result: an EV that costs 30–50% less than leasing privately. This calculator shows exactly what you'd save.
Your employer deducts the lease cost from your gross salary — before income tax and NI are calculated. So instead of paying £500/month from taxed income (which costs you £833 gross if you're a 40% taxpayer), you pay £500 gross.
The catch: HMRC treats the car as a benefit-in-kind. For pure EVs, the BIK rate is 3% in 2026/27 — meaning on a £40,000 car, you pay tax on £1,200 of notional income, which costs a higher-rate payer £480/year. That's tiny compared to the £2,400+ in tax savings.
The result: your net cost for the car drops by 30–50% versus leasing privately, and you get insurance, maintenance, breakdown cover and road tax rolled in.
Basic-rate taxpayers save less — the discount drops to roughly 20–30% versus 40–50% for higher-rate.
Early termination penalties — if you leave your employer, the remaining lease payments typically accelerate. Understand the exit terms before signing.
Pension impact — salary sacrifice reduces your pensionable pay. If your employer matches pension contributions as a percentage of salary, you lose that matching on the sacrificed amount. For a £500/month sacrifice, that's up to £150–£250/year in lost pension contributions.
Loan and mortgage impact — lower gross pay on payslips can affect affordability assessments for mortgages. Timing matters.
BIK rises — 3% now, 4% in 2027/28, 5% in 2028/29. The discount erodes slightly each year as BIK rises, but even at 7% (the announced ceiling for 2029/30), salary sacrifice remains significantly cheaper than private leasing for most taxpayers.