Company car tax and salary sacrifice

Company car tax is worked out from the car's list price multiplied by its appropriate percentage, then taxed at the driver's marginal income tax rate. In 2026/27 an electric car sits at 4%, against 26% for a typical petrol car. HMRC has already published the path for electric cars to 2029/30: 5% in 2027/28, 7% in 2028/29 and 9% in 2029/30. The gap narrows over that period, but it stays wide, so a fleet can plan years ahead on rates that are already published.

Salary sacrifice is where most drivers meet those rates. The monthly cost comes out of gross pay, so the employee saves income tax and National Insurance on it and pays benefit-in-kind on the car instead. On 2026/27 rates, the saving is 28% of the sacrificed pay for a basic-rate taxpayer, 42% at the higher rate and 47% at the additional rate. For cars emitting no more than 75g/km, HMRC says the normal benefit-in-kind charge always applies, which is what keeps electric cars the natural choice for a scheme.

Schemes carry obligations as well as savings. A sacrifice must not take an employee's cash pay below the National Minimum Wage, which matters for lower earners and staff on variable hours.

This hub brings together our reporting on company car tax, car allowances and salary sacrifice, with the rate tables and take-home arithmetic in THRIVE Data.