Salary sacrifice explained
Explore the benefits of salary sacrifice
Whether choosing a fully electric or plug-in hybrid car, salary sacrifice is an increasingly popular way for employees to lease an alternatively-fuelled vehicle.
These schemes can unlock many benefits, including attractive tax savings for drivers and their employers. Below, we explain how salary sacrifice works, helping businesses and drivers to make an informed choice.
How does salary sacrifice work?
Employees choose a vehicle to lease and the terms – including annual mileage and the length of the lease – and pay the monthly fee from their gross, or pre-tax, salary.
In doing so, employees can reduce how much of their income is subject to tax, making a personal saving on income tax and national insurance payments. This also reduces the amount of national insurance that the employer pays, creating tax savings for the business as well.
Employees have to pay taxes on some benefits their employer provides, including cars. This is called ‘Benefit-in-Kind’ (BiK), though it’s often referred to as ‘company car tax’.
How much tax you pay is set at a percentage of the car’s P11D value – that is, its list price plus VAT and any delivery fees. Cars capable of long-distance, all-electric driving – and with low tailpipe emission values – are subject to low BiK rates.
For those with electric ranges over 130 miles – which includes every vehicle in our award-winning ID. range – the BiK rate is fixed at just 2% in 2024/25, rising to 3% in 2025/26.
Plug-in hybrid vehicles capable of between 70-129 electric miles qualify for 5% BiK in 2024/25, increasing to only 6% in 2025/26.
A model for every requirement
Volkswagen’s range of fully electric and plug-in hybrid electric vehicles are available via salary sacrifice, offering drivers attractive tax-saving opportunities – no matter which model you choose.
Built to meet a wide range of business requirements and driver preferences, explore our award-winning range of fully electric and plug-in hybrid vehicles today.
