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Salary Sacrifice for Employees

Salary Sacrifice for Employees

UNDERSTANDING BENEFIT IN KIND (BIK) AND YOUR MONTHLY COST

When you get a company car through a salary sacrifice scheme, you’ll need to pay Benefit in Kind (BIK) tax. This is a tax on the value of the car you’re receiving as a benefit from your employer.

Calculating your BIK cost helps you understand how much tax you’ll pay each month and allows you to budget accordingly. While BIK tax applies, salary sacrifice can still be a cost-effective way to drive a new car. The scheme often includes savings on Income Tax and National Insurance, plus added benefits like insurance, maintenance, and road tax – making it a hassle-free and affordable option compared to leasing a car privately.

Use the steps below to work out your BIK cost and see how much you’ll pay each month.

1.

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Find out the car’s P11D Value, BIK Rate %, and appropriate Tax Rate.

2.

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Multiply the P11D value by the BIK Rate %

This will give you the BIK Value.

3.

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Multiply the BIK Value by the appropriate tax band - i.e. 20% or 40%.

This will give you the annual BIK cost.

4.

Divide this amount by 12 to get the approximate cost per month.

This will give you the monthly BIK cost.

SALARY SACRIFICE COST EXAMPLE

Range Rover Sport P460e Dynamic SE

For employees considering a Range Rover Sport P460e Dynamic SE on Pivotal Subscription, here’s an example breakdown based on a monthly cost of £1,700 and current BiK tax rates:

  • P11D Value: £93,145
  • CO₂ Emissions: 17g/km (placing it in the 6% BiK tax band for 2025/26)

Taxable Benefit: £93,145 × 6% = £5,588.70 annually

Employee Cost Breakdown

Net Monthly Cost After Tax & Savings

Tax BandMonthly SubscriptionTax & NI SavingsBIK Tax PayableNet Monthly Cost
20% Taxpayer£1,700-£476£93.15£1,317.15
40% Taxpayer£1,700-£714£186.29£1,172.29

How This Impacts Payslips

  • Gross Salary Deduction: The £1,700 monthly cost is deducted before tax.
  • Reduced Taxable Income: Employees pay lower Income Tax and National Insurance.
  • BiK Tax Addition: Employees pay £93.15 (20%) or £186.29 (40%) per month in BiK tax.
  • Employer Savings: Businesses benefit from lower National Insurance contributions.

Salary sacrifice schemes must be set up by your employer before a vehicle can be allocated. The availability of vehicles is subject to demand.

Speak to a pivotal expert

We’ll explain how you can join, the documents you’ll need and how quickly we can deliver your vehicle.

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Copyright © 2025 InMotion Ventures 3 Ltd
InMotion Ventures 3 Limited t/a Pivotal is authorised and regulated by the Financial Conduct Authority for entering into regulated consumer hire agreements under firm reference number 806251. InMotion Ventures 3 Limited is registered in England and Wales company number 10445040. Registered office at Abbey Road, Whitley, Coventry, England, CV3 4LF. Insurance distributed and administered by Car Care Plan Ltd who are authorised and regulated by the Financial Conduct Authority. Financial Services Register No. 309268.

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