Salary Sacrifice, Explained: Your Questions Answered

Salary sacrifice is one of the most useful employee benefits a UK employer can offer, and also one of the easiest to misunderstand. Below are the questions we hear most often from employees and employers, answered in plain English. Every figure here is indicative and depends on your circumstances, and nothing here is personal tax or financial advice. When you want your own numbers, the free Perx calculators at calculators.covase.co.uk will show them in about 20 seconds.

For Employees

What is a salary sacrifice car scheme and how does it work?

You agree to give up a fixed amount of your gross salary, and in return your employer provides an electric car. With Perx, you can also add a home charger, solar panels or a home battery if you want them. Because the amount comes from gross pay before income tax and National Insurance are applied, the indicative net monthly cost is lower than paying from taxed income.

Why does an electric car work out differently through salary sacrifice?

With personal finance or PCP, you pay from net pay, after tax and National Insurance have already been taken. Salary sacrifice funds the benefit from gross pay instead, which changes the monthly figure you see. The calculator shows the indicative net monthly cost so you can compare the options on a like-for-like basis.

What is Benefit-in-Kind, and how much is it on an electric car?

Benefit-in-Kind, or BiK, is the tax charged when you have the use of a company benefit such as a car. For fully electric cars, the BiK rate is deliberately low to support the switch, at 4% for 2026/27 and rising gradually in later years. The calculator includes the current BiK position automatically, so the figure you see already reflects it.

Can I get a charger, solar or a battery through Perx too?

Yes. Perx is a 4-in-1 benefit, so you can model an electric car on its own or add a home charge point, solar panels or a home battery into the same arrangement. That lets people look at the full home and car picture in one place, rather than piecing it together from separate quotes.

What does “indicative net monthly cost” mean?

It means the calculator gives you a useful estimate, not a quote. The result depends on salary, tax band, vehicle, term and mileage, so the number is there to help you understand the shape of the benefit before you decide whether to go ahead.

Does salary sacrifice affect personal allowance or Tax-Free Childcare?

It can. Salary sacrifice reduces your adjusted net income, which is the figure used for a number of thresholds, including the personal allowance taper above £100,000. For some people that makes the benefit more valuable than it first appears, but the effect depends on your personal circumstances.

Will I have to pay the new pay-per-mile charge from 2028?

The Government has announced plans for a per-mile charge for EVs from April 2028, with reporting indicating 3p per mile for battery EVs and 1.5p per mile for plug-in hybrids. It applies broadly to EVs, not just salary sacrifice cars. We will keep this answer updated as the final detail is confirmed.

What happens if I leave my employer or my circumstances change?

That is a fair question, and a good scheme should answer it clearly before you order. Reputable schemes include life-event and early-termination protection so employees are not left exposed if their circumstances change. The exact terms depend on the scheme, so it is worth checking before you sign up.

Is salary sacrifice right for everyone?

Not always. It cannot take pay below the National Minimum Wage, and because it reduces gross pay, it may affect things such as mortgage affordability or some salary-based calculations. For many eligible employees it is a strong option, but it is best checked against the calculator and your own circumstances before you proceed.

For employers

What does it cost a business to offer Perx?

It is designed to be a straightforward staff benefit rather than a new admin burden. Salary sacrifice reduces the pay that employer National Insurance is charged on, which helps make the scheme easier to run on a payroll basis. The employer calculator shows the indicative position at your headcount so you can see the business case on your own numbers.

How does salary sacrifice affect employer National Insurance?

Employer National Insurance is charged on gross pay. When part of that pay is sacrificed for a benefit, the amount subject to employer NI falls, which changes the employer-side cost profile. The calculator shows that effect as part of the employer view, so you can see how it works in practice.

Is it complicated to administer?

No. Perx is set up to run as a single payroll line per employee, covering the whole benefit rather than multiple separate arrangements. That keeps HR and payroll work to a minimum while still giving employees a clear benefit.

What is the risk at the end of a contract?

A salary sacrifice car is effectively a long-term rental, so mileage and condition still matter at return. That is why Perx includes Orbis intelligence inside every car, giving the scheme owner live visibility of mileage against the contracted allowance and the vehicle’s real-world condition. It means you can spot an issue early rather than discovering it at handback.

Why do employees value it?

Because it is a practical benefit they can actually use. It gives them access to an electric car, and optionally home charging or home energy kit, through a single payroll arrangement. For many employers it also helps with recruitment, retention and the move to a lower-carbon fleet.

How do we get started?

Start with the numbers. Use the employer calculator at calculators.covase.co.uk to see the indicative position, then take it forward at apply.covase.co.uk.

See what it works out to for you

Whether you are weighing up your first electric car or sizing the business case for your team, your own numbers are about 20 seconds away.

Try the free Perx calculators at calculators.covase.co.uk, and when you are ready, take it forward at apply.covase.co.uk.

Figures are indicative and depend on individual circumstances. This article is general information, not tax or financial advice. Tax rules and thresholds can change.