How is salary sacrifice calculated?

The first place to start is with the cost of your lease. When you sign up to lease an electric vehicle through your employer’s salary sacrifice scheme, there will be an annual cost for the lease. This will then be broken down into monthly payments.

The cost of your lease depends on a variety of factors including:

• The car you choose
• The length of your lease
• Annual mileage allowance

For standard leasing agreements, the deposit you put down is also factored into the overall cost of the agreement. However, with salary sacrifice car schemes, you often don’t need to put a deposit down.

Once you have the cost of your lease, this is then sacrificed from your salary, before tax. And this is the important point. Because it’s taken from your pre-tax salary, it reduces the amount of Income Tax and National Insurance contributions you need to make.