Everything you need to know about electric car salary sacrifice
Switching to an electric car is one of the most significant ways you can make a positive change towards net zero. At The Electric Car Scheme, we want to make it easier and cheaper than any other option. Salary sacrifice makes this possible, allowing employees to save 30-60% on any electric car by reducing your salary in exchange for an electric car as a benefit. This makes electric cars an affordable option for everyone.
Each person wants to make choices to achieve a net zero future. People are limited by information, access, price and complexity - this is slowing the process down globally. We have compiled a guide explaining what electric car salary sacrifice is, how it works and whether it is actually worth it.
How it works
Salary sacrifice is a good way for companies to provide their employees with a benefit without taking on the cost. In the case of electric car salary sacrifice, the business provides the car for the employee who sacrifices part of their salary to cover the cost of the car.
Unlike traditional car leases, where payments come from net pay (post-tax income), salary sacrifice deducts expenses from the gross salary (pre-tax income). This tax-efficient approach enables employees to maximise their savings.
You can read more about the common phrases and things you need to know in our blog, What is an electric car salary sacrifice scheme?
How does salary sacrifice work for employers?
EV salary sacrifice is a great way of making your employees feel more valued and can help build a healthier, more sustainable company! At The Electric Car Scheme, we try to make the process as simple as possible:
Register your interest and talk with one of our product specialists to understand how this would work in your business.
One of our product specialists will handle the scheme set-up and launch, ensuring a hassle-free process for you.
Then, we will assign a dedicated Customer Success Manager to support your business with the launch of the scheme - this includes employee webinars, demo days, promotions and more.
Once your scheme is launched, our EV Specialist and Customer Success Teams will regularly be in touch to ensure your scheme is an ongoing success.
Learn more about how The Electric Car Scheme could work for your company here.
Misconceptions about how salary sacrifice works for businesses
Through a survey of 250 Managing Directors, Finance Directors, and HR Directors, we uncovered several misconceptions. These misconceptions may be slowing down the adoption of salary sacrifice schemes:
89% of the surveyed directors believe that running a salary sacrifice scheme would cost their business money. It doesn’t! There are no set-up costs, and The Electric Car Scheme fee is equivalent to the employer’s tax savings so you can roll out the scheme at no cost to the business.
90% of directors have concerns about potential risks to their companies, such as an employee leaving or being made redundant. With The Electric Car Scheme, there is no risk
to the company if an employee decides to leave your business.
You can read more about the survey’s findings here.
Complete Risk Protection with The Electric Car Scheme
Complete Risk Protection provides reassurance that the employer is protected. If an employer has to make redundancies or dismiss an employee, they can do this at any time without facing a fee. This new proposition differs from other market offerings, which often feature complex terms & conditions, exclusion periods and return limits, potentially leaving employers with significant bills or headaches.
The Electric Car Scheme’s Complete Risk Protection Service also protects the employer from any shortfall due to employee resignation, long-term sickness, or family-friendly leave. A new and unique feature even protects employers if the employee doesn’t repay the company for damage to their car.
Visit our website to learn more about Complete Risk Protection
What are the advantages for an employer?
The very best employee benefit, without a cost to the company!
The benefits of salary sacrifice schemes to employees are obvious, making companies that offer this benefit very popular. As mentioned previously, this comes at no cost to the employer.
Companies can also benefit by providing salary sacrifice options to their employees, typically at no setup cost. Any charges are covered by the company’s tax savings.
Improved talent attraction and retention
By providing an employee benefit like The Electric Car Scheme, you not only gain a competitive edge in the recruitment market but also foster greater engagement and loyalty among your current team. This is especially significant as employees can save thousands through salary sacrifice schemes. This is a strong reward tool which helps you look after your valued employees.
Protection against unwanted risks
This is where not every salary sacrifice scheme is the same. Typically there are risks of unwanted and unplanned costs if employees enrolled on salary sacrifice leave the company.
Early exit fees for lease cars can make this a blocker to offering a benefit like The Electric Car Scheme - which is why our scheme is set up to protect both the company and employee against these risks.
Supported throughout the journey
Some salary sacrifice schemes only supply you with an electric car and then they leave it to you - which can be frustrating. The Electric Car Scheme supports you with payroll, finance and HMRC administration to make it simple to offer the benefit to your employees.
Reach your environmental goals
Achieving net zero emissions as a company is also made more achievable when your staff travel to and from work in electric cars. It shows you are serious about achieving net zero, and helps lower your carbon footprint, one car at a time.
How does salary sacrifice work for employees?
EV salary sacrifice is very similar to the Cycle to Work scheme but for electric cars! With The Electric Car Scheme, your company will lease a car of your choice and will pay for the cost of the lease. You agree to ‘sacrifice’ some of your gross salary, covering the cost of the lease, in return for getting provided a company car of your choice.
Instead of leasing an electric car in the normal way, which is paid using your post-tax (or net) income, the fixed monthly payments are taken from your salary before any income tax or National Insurance is paid.
A car through The Electric Car Scheme is an employee benefit provided to you. As it’s a ‘company car’, there is a company car tax payable. However, the value of this “benefit-in-kind” (BIK) is set by HMRC, and set at very low rates until at least 2028.
While the BIK is taxable, when salary sacrifice is applied to electric cars the BIK is very low, so The Electric Car Scheme can be extremely cost-effective for employees.
What are the advantages for an employee?
Substantial tax savings
Payments come out of your salary before tax is deducted, helping you save 30-60% on the car and any extras included. Choose the car you want, add on any extras, and drive away saving thousands of pounds.
Access any electric car, on any lease Electric Car Scheme
The savings are not tied to only one specific lease company or one type/brand of car or lease deal. We have access to the top leasing companies which means you can access the best prices available. You can be confident that you’re getting the best prices available in addition to the full 30-60% tax savings on the cost of the car via salary sacrifice.
Drive down your CO2 emissions
Switching to an electric car is one of the fastest ways to reduce your carbon footprint. It is satisfying to know you are making a difference every day.
Expert guidance all the way with The Electric Car Scheme
Salary sacrifice schemes are a great way to make the switch to your first electric car. The team at The Electric Car Scheme offer helpful tips and guidance to make this easier for you. Our team help select the electric car that best meets your needs and guides you through the process
Is EV salary sacrifice worth it?
Salary sacrifice can be worth it for both employees and employers, as it allows for significant tax savings and provides cost-effective access to electric cars. The table below shows the potential savings you can enjoy when opting for an electric car through salary sacrifice.
Using the Audi Q4 e-tron Estate as an example, with The Electric Car Scheme, you could pay just £516 per month. When you compare this price to a standard lease, you'll save £10,613 over three years or 36% compared to leasing the car yourself.
You can see below how salary sacrifice savings are calculated on the Audi Q4 e-tron.
| HOW ARE YOUR SAVINGS CALCULATED? | BREAKDOWN PER MONTH |
|---|---|
| BEST LEASE PRICE AVAILABLE | £811 |
| EMPLOYEE TAX SAVINGS | -£340 |
| AVERAGE BENEFIT IN KIND TAX | £46 |
| YOU PAY | £516 |
Note: All pricing shown in this post is based on data collected from The Electric Car Scheme quote tool. All final pricing is inclusive of VAT. All prices above are based on the following lease terms; 10,000 miles pa, 36 months, £70,000 salary per annum and are inclusive of Maintenance and Breakdown Cover.
What’s important in an electric car salary sacrifice scheme?
A fair deal
Not all car leases or tax savings are equal. Some leases are costly, while some schemes inflate prices to hide profits. The Electric Car Scheme collaborates with multiple lease companies to secure the best value, ensuring employees receive the maximum tax benefit without limitations.
Risk protection
It's crucial to avoid being burdened with cars and costs if employees can't continue with the scheme. Many car leases have steep early termination fees, and some schemes offer limited protection, especially for maternity and paternity situations or unexpected car returns. Ensure you comprehend the risk protection in an electric car scheme before extending it to all employees.
Expertise
Employment contracts, HMRC notifications, tax calculations, VAT returns, and employee departures all involve complexities. When establishing a salary sacrifice electric car scheme, it's vital to seek support and expertise.
While some companies discuss salary sacrifice or energy, they may not offer the comprehensive support needed for a smooth and risk-free scheme for employees. The Electric Car Scheme is the sole UK scheme specializing entirely in electric car salary sacrifice, providing end-to-end support, setup, reporting, notifications, and expert guidance. Discover more about implementing this employee benefit on our company pages.
An all-inclusive package
Salary sacrifice schemes can reduce the cost of your electric car by 30% to 60% by deducting payments from your gross salary before tax. While many schemes stop there, The Electric Car Scheme goes a step further, offering the option to include car servicing, maintenance, tire replacements, breakdown cover, comprehensive car insurance, and charging point installation. This comprehensive package makes the transition to electric cars both more convenient and affordable for your employees.
How do you set up a salary sacrifice scheme?
Setting up an electric car salary sacrifice scheme is not straightforward without the expertise of employment law, tax treatment or car leasing. There is also the risk management side to consider, whether that is setting up a tax-compliant salary sacrifice scheme, or on the early termination risks that come with offering electric car salary sacrifice.
The Electric Car Scheme is an easier and hassle-free way of offering salary sacrifice electric cars to employees. The salary sacrifice company you choose should ensure there is no significant risk in the way the scheme is set up. They should also help you with reporting, benefit calculations, HMRC reporting, accounting and payroll instructions.
Learn more about The Electric Car Scheme by visiting our website.
