Will Salary Sacrifice Leasing Still Be Worth It in 2026?

Salary sacrifice car leasing has become a popular employee benefit in the UK, particularly for electric vehicles. By exchanging part of gross salary for a company-provided leased car, employees can reduce tax and National Insurance while gaining access to a new vehicle with predictable monthly costs.

As we move closer to 2026, many UK employees and employers are asking whether salary sacrifice leasing will still represent good value. Government policy, benefit-in-kind rules, employer National Insurance considerations, and the evolving electric vehicle market all play a role. This article explores whether salary sacrifice car schemes are likely to remain worthwhile in the UK in 2026, and for whom they make the most sense.

The Short Answer

For many UK employees, particularly those choosing fully electric vehicles, salary sacrifice leasing is still expected to be worthwhile in 2026. However, it is no longer a universal “no-brainer”. The financial benefit depends on individual circumstances, the type of vehicle chosen, and how an employer structures its scheme.

How salary sacrifice leasing works in the UK

Under a salary sacrifice arrangement, an employee agrees to give up part of their gross salary in return for a non-cash benefit, such as a leased company car. Because the reduction happens before tax and National Insurance are applied, take-home pay is reduced by less than the value of the benefit. However, company cars are subject to UK benefit-in-kind tax. The employee pays income tax on the taxable value of the vehicle, which is calculated using government-set rules based on the vehicle’s characteristics. The overall value of salary sacrifice comes from the balance between tax and National Insurance saved on salary, and tax paid on the benefit.

Why electric vehicles remain central to the value proposition

In the UK, fully electric vehicles continue to benefit from significantly more favourable benefit-in-kind treatment than petrol, diesel, or many hybrid vehicles. This is the single biggest reason salary sacrifice schemes have grown so rapidly in recent years. While the tax advantage for electric vehicles is gradually reducing over time as part of long-term government policy, they are still treated far more favourably than internal combustion engine cars. As a result, salary sacrifice remains most attractive when used for battery electric vehicles rather than hybrids or conventional cars.

What is changing as we approach 2026

Gradual changes to benefit-in-kind rules

The UK government has set out a long-term framework in which benefit-in-kind rates for electric vehicles rise slowly over time. This means the tax cost of having an electric company car is higher than it was in earlier years, but still comparatively low. In practice, this slightly reduces savings but does not remove them altogether.

Employer costs and scheme design

Employers in the UK must consider National Insurance, administration, and risk when offering salary sacrifice schemes. Some employers choose to absorb certain costs, while others pass them on to employees. As a result, two salary sacrifice offers can look very different even for the same vehicle. The value of the scheme in 2026 will depend heavily on how generous and well-designed an employer’s arrangement is.

The wider electric vehicle market

The UK electric vehicle market has matured significantly. There is now a wider range of models, improved charging infrastructure, and more competitive leasing terms. This helps support the ongoing appeal of salary sacrifice leasing, even as tax advantages narrow slightly.

Who is most likely to benefit in 2026

Salary sacrifice leasing in the UK is likely to remain most worthwhile for:

• Employees choosing fully electric vehicles

• Employees who pay income tax at more than the basic level

• Employees whose employer offers a well-structured scheme with inclusive features such as insurance, servicing, and maintenance

• Employees who value predictable monthly costs and low hassle motoring

Those who opt for hybrid or petrol vehicles, or who work for employers with less competitive schemes, may see far smaller advantages.

Key considerations before signing up

Before entering a salary sacrifice car agreement in the UK, employees should consider more than just the headline monthly cost.

Lower gross salary can affect:

• Mortgage affordability assessments

• Pension contributions linked to salary

Employees should also review what happens if they leave their job, as early termination rules can differ between schemes.

Alternatives worth comparing

Salary sacrifice should always be compared against other UK motoring options, such as:

• Personal leasing or PCP

• Buying a vehicle outright

• Taking a cash car allowance where available

In some cases, especially for non-electric vehicles or lower earners, these alternatives may be more suitable.

The Bottom Line for 2026

In a UK context, salary sacrifice leasing is still expected to be worth considering in 2026, particularly for electric vehicles. While the financial advantage is not as dramatic as it once was for plug-in hybrids, it remains meaningful for many employees when combined with employer support and inclusive packages. The key difference in 2026 is that salary sacrifice is no longer automatically the best choice for everyone. UK employees should carefully assess their tax position, employer scheme details, and personal circumstances before deciding. When evaluated properly, salary sacrifice leasing can still be a valuable and practical way to drive an electric car in the years ahead.