Electric Car Salary Sacrifice: Employer Cash Savings

A qualifying zero-emission company car can generate employer Class 1 savings through salary sacrifice, but the employer normally pays Class 1A NI on the car’s taxable benefit. Gross NI relief is not the same as net employer saving.

Year-specific zero-emission BiK rates

Tax year	BiK percentage
2024–25	2%
2025–26	3%
2026–27	4%
2027–28	5%
2028–29	7%
2029–30	9%

BiK uses the actual P11D/list price and relevant availability period, not the lease payment. Hybrids and combustion vehicles require different rules and are not included in this calculator.

Worked employer example

For a £40,000 zero-emission car with £500 monthly gross sacrifice in 2026–27:

• Annual sacrifice: £6,000.
• Gross Class 1 NI reduction: £900, where the employee has sufficient NI-able earnings.
• Car BiK: £40,000 × 4% = £1,600.
• Employer Class 1A: £1,600 × 15% = £240.
• Net NI benefit before fees and Employment Allowance: £660.

Employment Allowance offsets eligible employer Class 1 liability, not Class 1A. If the allowance already covers the entire Class 1 bill, the proposal can create an additional Class 1A cost without an offsetting cash Class 1 saving.

Complete the financial case

Compare the current arrangement with the proposal. Include provider fees, internal administration, irrecoverable VAT, unmatched benefit funding and early termination exposure. Consider leave, absence and changes in earnings that affect sacrifice affordability.

Minimum wage compliance must be assessed for each employee’s actual pay reference periods. An average salary screen cannot certify individual eligibility. Reference salary may be preserved for pension and other employment calculations where the contract and scheme rules provide for this.

Employee BiK income tax is separate from employer Class 1A. At £45,000 England salary in 2025–26, a £40,000 car with £6,000 sacrifice gives £1,200 gross tax relief, £480 NI relief and £240 BiK tax: net relief £1,440 and net annual car cost £4,560, under standard annual assumptions. This is a net benefit cost, not an increase in cash take-home pay.

Model the employer cash bridge.

Official guidance

• Company car percentages 2025–28
• Company car percentages 2028–30
• HMRC current employer rates