This guide provides detailed examples of how a salary sacrifice scheme might work on four of Tesla’s popular models: the Model 3, Model Y, Model S, and Model X.
The figures used in these examples are approximate guides to give an understanding of how such a scheme works. They are based on the models’ P11D list prices and their typical monthly lease costs.
We’ve looked at three income tax bands – 20%, 40%, and 45% – to provide a broad overview that covers a range of salary bands.
Editors Pick: Tesla Salary Sacrifice Provider
- Choose £400 home charging credit, £400 off a home charger or £400 Electroverse credit
- Compatible with Octopus Energy's smart EV tariffs
- Approved Used vehicles available
- Early termination protection built into every lease
How we calculated our Tesla salary sacrifice examples
Each example breaks down the potential savings and costs involved in a salary sacrifice scheme, which includes:
- The amount of income tax saved
This is calculated as a percentage of the monthly lease cost and depends on your income tax band. - National Insurance (NI) savings
For these examples, an employee’s NI rate of 2% was applied to the monthly lease cost. - The Benefit In Kind (BIK) that would be paid
BIK is a tax applied to employees who receive benefits or perks on top of their salary. The current rate of 2% of the P11D price (divided by 12 for a monthly figure) was used. - The employer’s NI contribution on the BIK value
This is calculated at a rate of 13.8% on the BIK value. - The net cost
This represents the overall monthly cost to the employee after all deductions and additions.
These calculations provide a starting point for understanding how an EV salary sacrifice scheme could impact your monthly outgoings if you were to lease or subscribe to a Tesla. They should be used as a guide rather than definitive advice, and it is always recommended to consult with an accountant for personalised advice.
How Does a Tesla Salary Sacrifice Work?
A Tesla salary sacrifice scheme is a type of employee benefit program that allows employees to “sacrifice” a portion of their salary in exchange for the lease of subscription of a Tesla.
Employee agrees to give up part of their pre-tax salary in exchange for a benefit (in this case, a Tesla car). The sacrificed portion of the salary reduces the employee’s gross salary. As a result, the employee pays less income tax and National Insurance, since these are calculated on the reduced salary.
The employer uses the sacrificed portion of the salary to lease or the Tesla. This is usually managed by a 3rd party salary sacrifice scheme provider. The scheme provider may also take care of insurance, maintenance, and other related costs, depending on the specific terms of the scheme.
One of the main advantages of a salary sacrifice scheme is the potential tax benefit. By reducing their taxable income, the employee can save money on income tax. Additionally, electric vehicles like Teslas have a reduced Benefit-in-Kind (BiK) tax rate in the UK.
At the end of the lease, the employee may have the option to purchase the vehicle at its market value, return it, or renew the arrangement.
It’s important to consider potential risks and downsides. For instance, a lower gross salary could impact mortgage applications or pension contributions. Additionally, if the employee leaves the company, they may have to pay an early termination fee.
Tesla Salary Sacrifice Examples at a 20% tax rate
| Tesla Model | P11D Price | Monthly Lease Cost | Income Tax Saved (20% band) | NI Saved (12%) | BIK Paid @ 2% | Employer's NI on BiK (13.8%) | Net Cost (20% band) |
|---|---|---|---|---|---|---|---|
| Model 3 | £42,000 | £381 | £76.20 | £45.72 | £70 | £9.66 | £338.74 |
| Model Y | £44,990 | £403 | £80.60 | £48.36 | £75 | £10.35 | £359.39 |
| Model S | £55,935 | £898 | £179.60 | £107.76 | £93.23 | £12.86 | £716.73 |
| Model X | £73,135 | £973 | £194.60 | £116.76 | £121.89 | £16.82 | £800.35 |
Tesla Model 3 Salary Sacrifice Example @ 20% tax rate
- P11D list price £42,000
- Monthly lease cost: £381
- Income tax rate: 20%
- Income Tax Saved (20% of £381): £76.20
- National Insurance (NI) Saved (12% of £381): £45.72
- Benefit In Kind (BIK) Paid @ 2% (2% of £42,000/12): £70
- Employer’s National Insurance (NI) on BiK (13.8% of £70): £9.66
Net Cost: £381 – £76.20 – £45.72 + £70 + £9.66 = £338.74
Tesla Model Y Salary Sacrifice Example @ 20% tax rate
- P11D list price £44,990
- Monthly lease cost: £403
- Income tax rate: 20%
- Income Tax Saved (20% of £403): £80.60
- National Insurance (NI) Saved (12% of £403): £48.36
- Benefit In Kind (BIK) Paid @ 2% (2% of £44,990/12): £75
- Employer’s National Insurance (NI) on BiK (13.8% of £75): £10.35
Net Cost: £403 – £80.60 – £48.36 + £75 + £10.35 = £359.39
Tesla Model S Salary Sacrifice Example @ 20% tax rate
- P11D list price £55,935
- Monthly lease cost: £898
- Income tax rate: 20%
- Income Tax Saved (20% of £898): £179.60
- National Insurance (NI) Saved (12% of £898): £107.76
- Benefit In Kind (BIK) Paid @ 2% (2% of £55,935/12): £93.23
- Employer’s National Insurance (NI) on BiK (13.8% of £93.23): £12.86
Net Cost: £898 – £179.60 – £107.76 + £93.23 + £12.86 = £716.73
Tesla Model X Salary Sacrifice Example @ 20% tax rate
- P11D list price £73,135
- Monthly lease cost: £973
- Income tax rate: 20%
- Income Tax Saved (20% of £973): £194.60
- National Insurance (NI) Saved (12% of £973): £116.76
- Benefit In Kind (BIK) Paid @ 2% (2% of £73,135/12): £121.89
- Employer’s National Insurance (NI) on BiK (13.8% of £121.89): £16.82
Net Cost: £973 – £194.60 – £116.76 + £121.89 + £16.82 = £800.35
Tesla Salary Sacrifice Examples at a 40% tax rate
| Tesla Model | P11D Price | Monthly Lease Cost | Income Tax Saved (40% band) | NI Saved (12%) | BIK Paid @ 2% | Employer's NI on BiK (13.8%) | Net Cost (40% band) |
|---|---|---|---|---|---|---|---|
| Model 3 | £42,000 | £381 | £152.40 | £45.72 | £70 | £9.66 | £262.54 |
| Model Y | £44,990 | £403 | £161.20 | £48.36 | £75 | £10.35 | £278.79 |
| Model S | £55,935 | £898 | £359.20 | £107.76 | £93.23 | £12.86 | £537.03 |
| Model X | £73,135 | £973 | £389.20 | £116.76 | £121.89 | £16.82 | £605.75 |
Tesla Model 3 Salary Sacrifice Example @ 40% tax rate
- P11D list price £42,000
- Monthly lease cost: £381
- Income tax rate: 40%
- Income Tax Saved (40% of £381): £152.40
- National Insurance (NI) Saved (12% of £381): £45.72
- Benefit In Kind (BIK) Paid @ 2% (2% of £42,000/12): £70
- Employer’s National Insurance (NI) on BiK (13.8% of £70): £9.66
Net Cost: £381 – £152.40 – £45.72 + £70 + £9.66 = £262.54
Tesla Model Y Salary Sacrifice Example @ 40% tax rate
- P11D list price £44,990
- Monthly lease cost: £403
- Income tax rate: 40%
- Income Tax Saved (40% of £403): £161.20
- National Insurance (NI) Saved (12% of £403): £48.36
- Benefit In Kind (BIK) Paid @ 2% (2% of £44,990/12): £75
- Employer’s National Insurance (NI) on BiK (13.8% of £75): £10.35
Net Cost: £403 – £161.20 – £48.36 + £75 + £10.35 = £278.79
Tesla Model S Salary Sacrifice Example @ 40% tax rate
- P11D list price £55,935
- Monthly lease cost: £898
- Income tax rate: 40%
- Income Tax Saved (40% of £898): £359.20
- National Insurance (NI) Saved (12% of £898): £107.76
- Benefit In Kind (BIK) Paid @ 2% (2% of £55,935/12): £93.23
- Employer’s National Insurance (NI) on BiK (13.8% of £93.23): £12.86
Net Cost: £898 – £359.20 – £107.76 + £93.23 + £12.86 = £537.03
Tesla Model X Salary Sacrifice Example @ 40% tax rate
- P11D list price £73,135
- Monthly lease cost: £973
- Income tax rate: 40%
- Income Tax Saved (40% of £973): £389.20
- National Insurance (NI) Saved (12% of £973): £116.76
- Benefit In Kind (BIK) Paid @ 2% (2% of £73,135/12): £121.89
- Employer’s National Insurance (NI) on BiK (13.8% of £121.89): £16.82
Net Cost: £973 – £389.20 – £116.76 + £121.89 + £16.82 = £605.75
Tesla Salary Sacrifice Examples at a 45% tax rate
| Tesla Model | P11D Price | Monthly Lease Cost | Income Tax Saved (45% band) | NI Saved (12%) | BIK Paid @ 2% | Employer's NI on BiK (13.8%) | Net Cost (45% band) |
|---|---|---|---|---|---|---|---|
| Model 3 | £42,000 | £381 | £171.45 | £45.72 | £70 | £9.66 | £243.49 |
| Model Y | £44,990 | £403 | £181.35 | £48.36 | £75 | £10.35 | £258.64 |
| Model S | £55,935 | £898 | £404.10 | £107.76 | £93.23 | £12.86 | £492.23 |
| Model X | £73,135 | £973 | £437.85 | £116.76 | £121.89 | £16.82 | £556.30 |
Tesla Model 3 Salary Sacrifice Example @ 45% tax rate
- P11D list price £42,000
- Monthly lease cost: £381
- Income tax rate: 45%
- Income Tax Saved (45% of £381): £171.45
- National Insurance (NI) Saved (12% of £381): £45.72
- Benefit In Kind (BIK) Paid @ 2% (2% of £42,000/12): £70
- Employer’s National Insurance (NI) on BiK (13.8% of £70): £9.66
Net Cost: £381 – £171.45 – £45.72 + £70 + £9.66 = £243.49
Tesla Model Y Salary Sacrifice Example @ 45% tax rate
- P11D list price £44,990
- Monthly lease cost: £403
- Income tax rate: 45%
- Income Tax Saved (45% of £403): £181.35
- National Insurance (NI) Saved (12% of £403): £48.36
- Benefit In Kind (BIK) Paid @ 2% (2% of £44,990/12): £75
- Employer’s National Insurance (NI) on BiK (13.8% of £75): £10.35
Net Cost: £403 – £181.35 – £48.36 + £75 + £10.35 = £258.64
Tesla Model S Salary Sacrifice Example @ 45% tax rate
- P11D list price £55,935
- Monthly lease cost: £898
- Income tax rate: 45%
- Income Tax Saved (45% of £898): £404.10
- National Insurance (NI) Saved (12% of £898): £107.76
- Benefit In Kind (BIK) Paid @ 2% (2% of £55,935/12): £93.23
- Employer’s National Insurance (NI) on BiK (13.8% of £93.23): £12.86
Net Cost: £898 – £404.10 – £107.76 + £93.23 + £12.86 = £492.23
Tesla Model X Salary Sacrifice Example @ 45% tax rate
- P11D list price £73,135
- Monthly lease cost: £973
- Income tax rate: 45%
- Income Tax Saved (45% of £973): £437.85
- National Insurance (NI) Saved (12% of £973): £116.76
- Benefit In Kind (BIK) Paid @ 2% (2% of £73,135/12): £121.89
- Employer’s National Insurance (NI) on BiK (13.8% of £121.89): £16.82
Net Cost: £973 – £437.85 – £116.76 + £121.89 + £16.82 = £556.30
About Tesla in the UK
Tesla is always at the forefront of EV technology, it was founded in 2003 by engineers Martin Eberhard and Marc Tarpenning. The company gained significant momentum under the leadership of Elon Musk, who, after leading the initial rounds of investment, took over as CEO. Musk, known for his previous success as a co-founder of PayPal, played a crucial role in steering Tesla’s vision and growth.
Tesla’s journey began with the launch of the Tesla Roadster in 2008. This car, marketed as the ‘quickest car in the world’, set records in acceleration, range, and performance, marking a significant milestone in the history of electric vehicles. In May 2010, Tesla took a major step forward by purchasing the Tesla Factory in California, paving the way for the production of the Model S in September of that year. The Model S received widespread acclaim, winning several awards in 2012 and 2013.
In 2016, Tesla unveiled the Model 3 Sedan, a less expensive and more accessible car for the average consumer. This move marked Tesla’s entry into a broader market segment, furthering its mission of accelerating the world’s transition to sustainable energy. Following the success of the Model 3, Tesla introduced the Model Y in 2019, which was based on the Model 3 platform.
In the UK, Tesla’s presence has been steadily growing. The company’s focus on innovation and sustainability resonates well with the UK’s increasing emphasis on reducing carbon emissions and promoting green technology. With vehicle deliveries reaching a record 1.31 million units in 2022 globally, Tesla’s growth trajectory shows a strong upward trend. The UK market has been receptive to Tesla’s range of vehicles, with a particular interest in models like the Model 3 and Model Y, which combine affordability with cutting-edge technology.
Tesla’s journey in the UK is a reflection of the global shift towards electric vehicles and sustainable transportation. With its innovative technology, range of electric vehicles, and commitment to sustainability, Tesla continues to play a pivotal role in shaping the future of the EV industry not just in the UK, but worldwide.
MORE> How Long Does a Tesla Battery Last?
Is the Cybertruck Available for Salary Sacrifice?
It seems highly unlikely that you would be able to salary sacrifice the Tesla Cybertruck in the UK, at least in its current form and under current regulations. Here are the key reasons why:
- Availability in the UK: As of now, the Tesla Cybertruck is not available in the UK. The vehicle has been released in the US, but there are doubts about its release in the UK due to various regulatory and practical reasons.
- Vehicle Weight and Licensing Requirements: The Cybertruck’s weight classifies it as a light-duty truck in the US, exempting it from certain safety standards. However, in the UK, the story is different. Vehicles with a Maximum Gross Vehicle Weight (MGVW) over 3.5 tonnes require a Category C1 driving license. The Cybertruck’s weight, ranging from 3,629 kg to 4,536 kg, significantly exceeds this limit. This requirement makes it impractical for the average driver in the UK, as not many would be willing or able to obtain a C1 license just for this vehicle.
- R&D and Profitability Concerns: Adapting the Cybertruck to meet UK standards, especially regarding its weight, would require significant Research and Development (R&D) efforts by Tesla. Given the niche nature of this vehicle and the additional licensing requirements for drivers, it is questionable whether such adaptations would be profitable for Tesla.
- Salary Sacrifice Schemes: For a vehicle to be included in a salary sacrifice scheme in the UK, it typically needs to be widely available, meet certain safety and environmental standards, and be practical for the average employee to use as a regular vehicle. Given the Cybertruck’s current status, it does not seem to meet these criteria.
The final word on Tesla salary sacrifice examples
The salary sacrifice scheme can be a cost-effective way to drive a Tesla. In looking at the Model 3, Model Y, Model S, and Model X examples, you can see that the net monthly cost varies significantly depending on the P11D value of the vehicle, the income tax band of the employee, and the corresponding tax savings involved.
These examples have shown that the potential savings can be considerable, particularly for those in the higher tax bands.
However, it’s important to remember that the actual savings will depend on the specifics of your salary, the lease agreement, and other personal circumstances.
Furthermore, the tax benefits of electric vehicles make them particularly advantageous for salary sacrifice schemes. The Benefit In Kind (BIK) rates are significantly lower for Electric company cars compared to petrol cars, and this is reflected in the net costs in our examples. Other benefits include the possibility to bundle tyre replacement, windscreen replacement and even Tesla car insurance into the overall cost of a salary sacrifice scheme.
It’s also important to consider other factors such as the impact a salary sacrifice has on your eligibility for mortgages, loans and pension contributions, which may be affected by a reduction in your gross salary.
We hope this guide has served as a starting point to understand the potential financial implications of a salary sacrifice scheme when considering a Tesla.
MORE> How Many kWh Does It Take to Charge a Tesla?
- Choose £400 home charging credit, £400 off a home charger or £400 Electroverse credit
- Compatible with Octopus Energy's smart EV tariffs
- Approved Used vehicles available
- Early termination protection built into every lease
Electric Car Guide does not provide tax advice. This article is for informational purposes only and is accurate at the time of writing. Be aware that UK tax legislation may change and you should consult your accountant if you need advice specific to your personal circumstance.
John is the Editor and Spokesperson for Electric Car Guide.
With over 20 years of writing experience, he has written for titles such as City AM, FE News and NerdWallet.com, covering various automotive and personal finance topics.
John’s market commentary has been covered by the likes of The Express, The Independent, Yahoo Finance and The Evening Standard.
