Car Salary Sacrifice Three Provider Report 2026-2027
Insights into current trends shaping UK car salary sacrifice scheme design
What is Car Salary Sacrifice?
A Car Salary Sacrifice scheme allows an employee to lease a brand new car from a third-party supplier that has partnered with their employer. The cost of the car is deducted from the employee’s salary each month before Income Tax and National Insurance Contributions (NIC) have been taken. Due to the typical cost of leasing a vehicle, care needs to be taken to ensure the individual’s gross salary does not fall below the minimum wage, you could set a minimum eligibility salary of around £25,000 in order to ensure they remain above national minimum wage limits.
It is important to note that the scheme is taxable and will be considered as a Benefit-in-Kind (BiK). The additional tax value will be based on factors including the cars value, its emissions and the employee’s tax bracket.
Typically the scheme providers include the following:
- Maintenance
- MOT
- Replacement Tyres and Servicing
- Breakdown Recovery
- Comprehensive Insurance
- Road Tax
- Accident Management
Introducing a Car Salary Sacrifice scheme can form an important part of your financial wellbeing strategy. Should electric or ultra low emission vehicles be made available to employees, this can also help boost your Corporate Social Responsibility (CSR) and Environmental Social and Governance (ESG).
Mercer Marsh Benefits (MMB) have designed this report for clients who are reviewing their employee benefit options and are considering introducing a Car Salary Sacrifice scheme for their UK employees.
