A Trust Leader's Guide to Offering EV Salary Sacrifice After the 2026 DfE Guidance
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Can academy trusts offer EV salary sacrifice without DfE approval in 2026?
Yes, in most cases. The DfE guidance published on 8 July 2026 confirms that prior DfE approval is not required for a scheme that presents no cost or liability to the trust if an employee does not fulfil their contractual obligations with the provider, or where any liability has been comprehensively mitigated. Academy trusts can proceed on this basis from 1 September 2026, and colleges from 1 August 2026. Trusts under a Notice to Improve must still seek prior approval.
That single sentence has reopened a benefit that was effectively closed to academy trusts for two years. For finance and governance leaders, the practical question is no longer "are we allowed?" but "how do we structure this so it passes the test, satisfies the Academy Trust Handbook, and stands up to audit?" This guide is a buyer's checklist for exactly that. It sets out what the DfE now requires, and shows where a properly protected electric car salary sacrifice scheme meets each requirement by design.
What the DfE now allows, and the one test that matters
The headline is the no-approval test. A scheme that leaves no residual cost or liability with the trust, or where that liability is comprehensively mitigated, does not need DfE sign-off. A scheme that fails that test does. In effect the DfE has written a product specification: the risk that a lease ends early, because a member of staff resigns, is made redundant or goes on long-term sick, must not land on the trust's balance sheet. This is the commercial heart of the decision. A scheme with full provider-side protection stays in the no-approval lane; a scheme that leaves early-termination liability with the trust does not, and would need approval before launch.
The trust's must-dos before launch
The guidance is explicit that a compliant scheme still carries obligations for the trust itself. Before entering a scheme, the DfE requires trusts to follow their own procurement procedures and meet their sector handbook requirements, ensure they have adequate resources to implement and manage the scheme, comply with HMRC requirements, and seek legal, HR and audit advice on how each scheme operates. Trusts must also put in place comprehensive mitigations so that no cost or liability falls on them if an employee does not meet their obligations, clearly document their decision-making and financial risk mitigations, and ensure staff receive clear information and are advised to take independent tax and pension advice.
None of this is removed by choosing a good provider. A strong provider makes the paper trail straightforward; it does not replace your duty to run procurement, take advice and document your decisions. Read the requirement to comply with HMRC's rules alongside the guidance on salary sacrifice and PAYE, which governs how the payroll deduction must operate.
Structuring a compliant scheme
The DfE also describes how a compliant scheme should be built. The trust leases vehicles through a master hire agreement with the leasing company. Each employee's individual agreement must clearly state that the employee is responsible for the vehicle and all chargeable costs, including early-termination fees and costs relating to damage or poor maintenance. There must be a contractual payroll-deduction agreement between the trust and the employee, in line with HMRC's salary sacrifice rules. Arrangements should minimise the trust's administrative burden, so that the provider, not the trust, contacts the employee directly to seek any remedy under the lease.
Trusts should complete their own supplier due diligence to find a scheme that offers value, and the DfE suggests considering the Government Commercial Agency supplier list under Crown Commercial framework RM6268. If a chosen scheme falls outside this described structure, the trust must seek DfE written approval before entering it. The Electric Car Scheme operates on a master hire model with provider-led remedy, meaning we pursue the employee directly under the lease, which maps to the DfE's requirement and keeps administration off your finance team.
The mitigations your board will ask about
The DfE lists four mitigations a trust must be able to evidence, and finance leaders will scrutinise the first one in particular. Trusts should retain a proportion of any National Insurance and employer pension-contribution savings from the scheme to provide a fund or insurance covering the cost or cashflow impact of leases ending early, limited to the period the trust could be liable. They should manage scale by limiting participation and allowing no more than one EV per employee. They should review the scheme annually and present the findings to the board. And the employee agreement must clearly set out the member's obligations and liabilities if they end the lease early.
The neat point for a finance reader is that the scheme partly funds its own risk cover: the employer's National Insurance saving, and the reduction in employer pension contributions because contributions are calculated on reduced pay, are precisely the sources the DfE says you can retain to cover early-exit risk. A Day-1-protected scheme reduces the size of that residual risk, because the provider absorbs the early-termination cost, but it does not remove your duty to document a mitigation policy. You can read how our Employer Protection for 2026/27 is structured, and see the wider employer economics in our guide to National Insurance savings through salary sacrifice.
Who can take part
The DfE sets eligibility criteria the trust must monitor. A participating employee's salary must stay above the National Minimum Wage after the deduction, which is £12.71 an hour for those aged 21 and over from April 2026 per the gov.uk minimum wage rates. The employee must have completed probation, be on the PAYE payroll, hold a valid UK driving licence, and not be subject to any current performance or conduct procedure. The wage floor is the criterion most likely to affect lower-paid support staff, which is where offering used electric cars through salary sacrifice widens access, since a lower monthly deduction keeps staff comfortably above the threshold.
Pensions -a brief signpost
Salary sacrifice reduces pensionable pay in both the Teachers' Pension Scheme and the LGPS, because both are defined-benefit CARE schemes rather than the private-sector defined-contribution schemes that often protect reference pay. Trusts must give staff clear information and advise them to take independent advice. The full detail, including the TPS "unapproved arrangement" treatment and LGPS APC mitigation, is covered in the schools pensions and compliance explainer later in this pack.
Procurement and value for money
Your handbook duties do not pause for a staff benefit. Treat scheme selection as a procurement exercise: test value, document why you chose your provider, and build the annual review into your governance calendar so the board sees evidence that the scheme continues to offer value. A multi-funder pricing engine, which sources across several UK leasing partners rather than a single funder, supports that value-for-money duty by creating competition on price. Our complete employer guide and the practical implementation checklist cover the operational detail your team will need.
How The Electric Car Scheme maps to the DfE test
The table below maps each DfE requirement to what it means for your trust and how our scheme supports it. The ECS column is factual, and it does not claim to remove your own obligations to take advice, document decisions or run procurement.
| DfE requirement | What it means for the trust | How The Electric Car Scheme supports it |
|---|---|---|
| No cost/liability test | Residual early-exit risk must not fall on the trust | Complete Employer Protection from Day 1 absorbs early-termination cost |
| Early-termination protection | Cover for resignation, redundancy, long-term sick | No exclusion period, no excess; covered from day one |
| Provider-led remedy | Provider, not trust, pursues the employee under the lease | ECS contacts the employee directly to seek remedy |
| Payroll deduction / HMRC | Contractual payroll-deduction agreement required | Compliant salary-sacrifice payroll process |
| Procurement / value | Handbook value-for-money duty | Multi-funder pricing engine creates price competition |
| Used EVs for lower-paid staff | Keep staff above NMW after deduction | New and used EVs; used widens access, ~14-day delivery |
| Annual review to board | Evidence scheme still offers value | Reporting supports an annual governance review |
| Set-up cost | Adequate resources to run the scheme | £0 set-up cost to the employer |
The single most important commercial point is the first row. Complete Employer Protection from Day 1 is the direct answer to the "no cost or liability to the trust" test: with no exclusion period and no excess, the early-termination liability sits with us by design, which is what keeps a trust in the no-approval lane. Many providers impose a roughly three-month exclusion period, during which the trust could carry the risk, which is precisely the gap the DfE flags. As experience signals, The Electric Car Scheme runs compliant schemes at scale for employers including Holland & Barrett, Leeds Bradford Airport and Time Out Group PLC, is rated 5 stars on Trustpilot, is a certified B Corp, and was named EV Salary Sacrifice Provider of the Year 2026 by SME News.
"The DfE has effectively written a product specification: a scheme is approval-free if it leaves no cost or liability with the trust. That is exactly what Complete Employer Protection from Day 1 delivers. If a teacher resigns, is made redundant or goes on long-term sick, the liability sits with us, not the school. Trusts still owe themselves proper procurement, legal and audit sign-off, and we make that paper trail straightforward."
— Thom Groot, CEO and Co-Founder of The Electric Car Scheme
A board-ready implementation checklist
Complete supplier due diligence, considering the GCA supplier list (RM6268).
Take legal, HR and audit advice on how the scheme operates.
Document your decision-making and financial-risk mitigation policy.
Put the master hire agreement and individual employee agreements in place, with employee liability for the vehicle and all chargeable costs clearly stated.
Set up the contractual payroll deduction in line with HMRC rules.
Define and monitor eligibility, including the NMW-after-deduction check and the performance/conduct exclusion.
Prepare staff communications and signpost independent tax and pension advice.
Schedule the annual review to the board.
Existing schemes
If your trust already runs an EV salary sacrifice scheme, the DfE expects you to evaluate it and, if it is not compliant with the new guidance, move to a compliant scheme at the earliest opportunity without breaching your existing provider agreement. In practice that means checking whether your current provider leaves any early-termination liability with the trust, and migrating if it does.
Bottom line
The moratorium is over, and a well-structured scheme now needs no DfE approval. The work that remains is governance: procurement, advice, a documented mitigation policy, eligibility monitoring and an annual board review. Choose a provider whose protection genuinely removes early-exit liability, and most of the compliance burden becomes a paper trail rather than a financial risk. To see how this would work for your trust, explore how salary sacrifice works for companies or request a quote and demo.
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Last updated: 21/07/26
Our pricing 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, and are inclusive of Maintenance and Breakdown Cover. The Electric Car Scheme's terms and conditions apply. All deals are subject to credit approval and availability. All deals are subject to excess mileage and damage charges. Prices are calculated based on the following tax saving assumptions: England & Wales, 40% tax rate. The above prices were calculated using a flat payment profile. The Electric Car Scheme Limited provides services for the administration of your salary sacrifice employee benefits. The Electric Car Scheme Holdings Limited is a member of the BVRLA (10608), is authorised and regulated by the FCA under FRN 968270, is an Appointed Representative of Marshall Management Services Ltd under FRN 667174, and is a credit broker and not a lender or insurance provider.
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