With the rise of electric car salary sacrifice schemes across the UK, one common question keeps coming up:
👉 “Is a salary sacrifice car considered a company car?”
The short answer is yes – but with key differences that make salary sacrifice cars a more flexible, tax-efficient option for both employers and employees.
What Is a Traditional Company Car?
A company car is provided by an employer for business and often personal use. Typically:
The employer owns or leases the vehicle.
Running costs (servicing, insurance, fuel/charging, tax) are covered by the company.
If used personally (including commuting), the car is classed as a Benefit-in-Kind (BiK).
Benefit-in-Kind is a taxable benefit that employees pay on non-cash perks such as company cars.
Petrol and diesel cars attract high BiK rates (25–37%).
EVs enjoy far lower BiK charges – currently just 3% until April 2025, rising gradually to 2029/30.
What Is a Salary Sacrifice Car?
A salary sacrifice car is usually an electric vehicle provided through an arrangement where the employee gives up part of their gross salary in exchange for the use of a fully maintained lease car.
The key features are:
The car is leased in the employer’s name.
The employee accesses the car through a pre-tax salary reduction.
Costs are bundled: insurance, maintenance, tyres, breakdown cover, and road tax.
From HMRC’s perspective, a salary sacrifice car is treated as a company car, but the financial model is very different.
Salary Sacrifice vs Company Car: The Key Differences
| Feature | Salary Sacrifice Car | Traditional Company Car |
|---|
| Tax Treatment | BiK applies (low for EVs) | BiK applies (high for petrol/diesel) |
| Who Pays? | Employee, via gross salary | Employer covers cost |
| Vehicle Choice | Employee selects make/model | Often chosen by employer |
| Ownership | Leased by employer, used by employee | Owned/leased by employer |
| Personal Use | Allowed, including commuting | Allowed (sometimes limited) |
| Costs Included | Insurance, servicing, tyres, breakdown cover, MOT, road tax | Usually included, but varies |
| Employee Cost | Lower thanks to tax/NI savings | Higher, especially for non-EVs |
Tax Treatment of Salary Sacrifice Cars
Here’s how salary sacrifice stacks up for tax purposes:
Benefit-in-Kind Tax: Employees pay BiK on the car’s taxable value. For EVs, this is minimal (3%).
Income Tax & NI Savings: The lease payment comes out of gross salary, reducing tax and NI contributions.
Employer NI Savings: Employers also save on National Insurance because taxable salary is lower.
The result? Salary sacrifice cars are often cheaper than a personal lease and far more efficient than traditional company cars.
Employee Flexibility
One of the biggest differences between the two schemes is employee control:
Employees can choose the car – make, model, colour, extras, and mileage allowance.
The car is leased through the employer but used exclusively by the employee.
At the end of the agreement, the vehicle is returned with no ownership hassle.
Traditional company cars, by contrast, often involve restricted choice and are more tied to business needs than employee preference.
What Happens If Circumstances Change?
Modern salary sacrifice schemes (including those offered by Cocoon Vehicles) are designed with life changes in mind:
Early termination protection for redundancy or resignation.
Options to pause or adjust during maternity, paternity, or long-term leave.
Transfer flexibility if another employee can take over the agreement.
Car Subscriptions or Short-Term Leases available for flexibility
This makes salary sacrifice a far more employee-friendly option than rigid company car programmes.
Why Employers Should Offer Salary Sacrifice
A salary sacrifice scheme isn’t just a perk — it’s a strategic benefit. Employers can:
Attract and retain top talent.
Support net zero and ESG goals by encouraging EV uptake.
Offer a high-value benefit without increasing payroll spend.
Save on National Insurance contributions.
And when working with a trusted provider like Cocoon Vehicles, all admin (insurance, contracts, vehicle handovers) is handled for you.
Frequently Asked Questions
Is a salary sacrifice car classed as a company car?
Yes. HMRC treats it as a company car, but the costs and savings are structured differently.
Who owns a salary sacrifice car?
The vehicle is leased by the employer, but the employee has exclusive use during the agreement.
Can I use a salary sacrifice car for personal journeys?
Yes — including commuting.
Does salary sacrifice affect my mortgage application?
It can reduce your gross salary, so some lenders may factor it in. However, many treat it like any other deduction.
Is insurance and maintenance included?
Yes. With Cocoon Vehicles, your monthly package covers insurance, servicing, tyres, breakdown cover, and more.
Set-up a Salary Sacrifice Scheme today!
Lets look at the reaosn your here… Is Salary Sacrifice a company car? Yes – but practically better!
It combines the HMRC treatment of a company car with the flexibility, cost savings, and simplicity of a personal lease. For employees, it’s one of the cheapest ways to drive a new EV. For employers, it’s a powerful, low-cost benefit that supports recruitment, retention, and sustainability.
Speak to the Cocoon team about Salary Sacrifice Schemes today on 01332 290173 or use the ENQUIRY FORM at the bottom of this article. We will provide you with honest and upfront advice from day one.
