What Is Electric Car Salary Sacrifice? Complete UK Guide 2026
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What Is Electric Car Salary Sacrifice And How Does It Work?
Electric car salary sacrifice is an agreement between an employer and an employee. The employee gives up a portion of their gross salary in exchange for the use of an electric car. Because the deduction is taken before tax, employees save on both Income Tax and National Insurance.
The monthly salary deduction usually includes:
The electric car lease
Breakdown cover
Optional extras such as tyres or home charging
This creates a single, predictable monthly cost with no large upfront payment.
Who Can Take Part In a Salary Sacrifice Scheme?
Most permanent UK employees can participate if:
Their employer offers an EV salary sacrifice scheme
Their pay remains above the National Minimum Wage after sacrifice
Any employer-specific eligibility rules are met
What Vehicles Are Available?
Employees typically have access to 200+ electric vehicles, including:
New EVs
Used EVs with verified battery health
Cars across a wide range of sizes and budgets
Employers may set a maximum vehicle value, but the choice remains broad.
How Much Can I Save Through a Salary Sacrifice Scheme?
Savings depend on:
Your tax band
The car’s list price (P11D value)
Lease length and mileage
Whether the vehicle is new or used
Most employees save between 20% and 50% compared to a personal lease
How Does Benefit-in-Kind (BiK) Tax Work For Electric Cars?
When you receive an electric car through salary sacrifice, HMRC treats it as a company car available for personal use. This means you pay Benefit-in-Kind tax (but at a much lower rate than petrol or diesel vehicles).
What Is The BiK Rate For EVs?
2025/26: 3%
2026/27: 4%
2027/28: 5%
These rates remain significantly lower than the maximum 37% applied to petrol and diesel company cars.
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How Is BiK Tax Calculated?
P11D value × BiK rate × your income tax band
The amount is collected monthly through PAYE, so there’s no separate payment to manage.
Am I Eligible For Electric Car Salary Sacrifice?
National Minimum Wage requirements
Salary sacrifice cannot reduce pay below:
£12.21/hour for workers aged 21+
Lower thresholds apply for younger employees
Employers are legally required to check this before approving participation.
What If My Pay Is Variable?
Employees with variable pay can still participate in electric car salary sacrifice schemes, provided their earnings consistently remain above the National Minimum Wage after salary sacrifice.
Does My Credit History Matter?
No. Salary sacrifice does not usually involve a personal credit check. The agreement is arranged through your employer as a workplace benefit, with payments taken from your salary rather than through personal finance.
Eligibility is based on your employment status and affordability checks (such as staying above the National Minimum Wage), not your credit score. This makes salary sacrifice a more accessible way to switch to electric compared with personal leasing or finance.
What Is Included With The Electric Car Scheme?
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The aim is to make switching to electric simple, predictable, and low risk, with most costs wrapped into one monthly salary deduction.
Insurance
Comprehensive insurance is typically included as part of the package. This removes the need for employees to arrange their own policy and helps ensure consistent cover throughout the lease, giving peace of mind from day one.
Maintenance And Servicing
Routine servicing, maintenance, and breakdown cover are bundled into the monthly cost. This helps avoid unexpected repair bills and makes it easier to budget, as day-to-day running costs are taken care of.
Can I Add a Home Charger?
Home charger installation can be included through The Electric Car Scheme, allowing employees to salary sacrifice the cost of the installation alongside their electric car. This decision is made at the point of choosing the vehicle, so both the car and charger can be arranged together.
Salary sacrificing the cost means it is paid for through pre-tax salary, rather than as an upfront expense. This helps spread the cost over time and keeps everything managed within one simple workplace benefit.
What Is The Charge Scheme?
The Charge Scheme allows employees to salary sacrifice the cost of charging their electric vehicle, alongside their car, as part of their workplace EV scheme.
This means eligible EV charging costs can be paid for through pre-tax salary, rather than from take-home pay. It’s designed to make running an electric car simpler and more predictable, with fewer separate bills to manage.
Image source: Shutterstock
How Does Salary Sacrificing EV Charging Work?
When choosing an electric car through The Electric Car Scheme, employees can also opt to include EV charging costs within their salary sacrifice arrangement. This keeps vehicle and charging costs aligned in one place and supports affordable, everyday electric driving.
The Charge Scheme doesn’t change the price of electricity or equipment itself, but it changes how those costs are paid, helping employees spread them over time and benefit from the same tax efficiencies as their car.
How Are Employers And Employees Protected?
Electric car salary sacrifice can raise understandable concerns about what happens if circumstances change. That’s why The Electric Car Scheme includes Complete Employer Protection as standard, removing financial risk for businesses and providing reassurance for employees.
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Electric car salary sacrifice can raise understandable concerns about what happens if circumstances change. That’s why The Electric Car Scheme includes Complete Employer Protection as standard, removing financial risk for businesses and providing reassurance for employees.
What is Complete Employer Protection?
Complete Employer Protection is designed to remove the main barrier to offering an EV salary sacrifice scheme - the potential cost if an employee leaves during the lease term. It ensures employers are not left covering remaining lease payments or unexpected charges due to common life events.
When Does Protection Apply?
Protection applies in the following scenarios:
Immediate cover: redundancy, dismissal, long-term sickness, loss of licence on medical grounds, or death
After 3 months: resignation
This structure balances flexibility for employees with financial certainty for employers.
What Happens If The Car Is Returned early?
If the car needs to be returned due to a covered circumstance, it is handed back without unexpected lease termination costs falling on the employer. There are no excesses, usage caps, or hidden conditions, helping both employers and employees participate in the scheme with confidence.
How Do I Calculate My Salary Sacrifice Savings?
The easiest way to understand how much you could save is by using a salary sacrifice calculator, which shows how tax, National Insurance, and Benefit-in-Kind interact based on your personal circumstances.
At The Electric Car Scheme, the calculator gives an estimated net monthly cost, helping employees see how salary sacrifice compares to a personal lease before making a decision.
What Factors Affect My Savings?
Your total savings through salary sacrifice depend on several key factors:
Your income tax band (basic, higher, or additional rate)
The vehicle’s P11D value (list price used for BiK calculations)
Lease term and annual mileage
Whether the car is new or used
Current BiK rate for electric vehicles
Because salary sacrifice reduces your taxable salary, employees in higher tax bands typically see larger savings, but most employees benefit to some degree.
How Do Tax Brackets Impact Savings?
The higher your marginal tax rate, the more you save through salary sacrifice.
Basic-rate taxpayers (20%) save primarily through reduced Income Tax and National Insurance
Higher-rate taxpayers (40%) benefit from significantly larger tax savings
Additional-rate taxpayers (45%) often see the greatest reductions in monthly cost
This is why two employees choosing the same electric car may pay very different net monthly amounts.
New vs. Used Car Savings Comparison
Choosing a used electric vehicle can reduce costs even further. Used EVs typically have a lower P11D value, which means:
Lower monthly salary sacrifice amounts
Reduced BiK tax
Faster access to an electric car
For many employees, a used EV offers the most affordable route into electric driving, while still including insurance, maintenance, and the same employer protections as a new car.
Real Employee Salary Sacrifice Case Studies (2025/26)
The examples below show how electric car salary sacrifice works for employees on different incomes, using the current 2025/26 tax bands and a 3% BiK rate. These are illustrative examples to help explain typical savings.
Example 1: Basic-rate Taxpayer With An Affordable EV (Dacia Spring)
Salary: £31,000
Tax band: 20%
Lease term: 36 months
Without salary sacrifice, a personal lease for a Dacia Spring could cost around £213 per month. With salary sacrifice, you could save £1,684 over three years.
Through salary sacrifice:
| Savings Breakdown - Dacia Spring Expression 45 27kWh | |
|---|---|
| Average monthly salary sacrifice (inc VAT) | £213 |
| Employee income savings | -£43 |
| Employee national insurance savings | -£17 |
| Average benefit-in-kind tax over term | £13 |
| Net cost/You pay | £166 |
This shows that salary sacrifice can be valuable even for basic-rate taxpayers choosing lower-cost EVs.
Example 2: Higher-Rate Taxpayer With a Mid-Range EV (Kia EV6)
Salary: £62,000
Tax band: 40%
Lease term: 36 months
A personal lease could cost around £620 per month, or £22,320 over three years.
Through salary sacrifice:
| Savings Breakdown - Kia EV6 Air SR 63kWh | |
|---|---|
| Average monthly salary sacrifice (inc VAT) | £789 |
| Employee income savings | -£316 |
| Employee national insurance savings | -£16 |
| Average benefit-in-kind tax over term | £67 |
| Net cost/You pay | £525 |
Example 3: Additional-Rate Taxpayer With A Premium EV (BMW i4)
Salary: £135,000
Tax band: 45%
Lease term: 36 months
A personal lease may cost around £850 per month, totalling £30,600 over three years.
Through salary sacrifice:
| Savings Breakdown - BMW i4 Gran Coupe eDrive40 Sport 83.9kWh | |
|---|---|
| Average monthly salary sacrifice (inc VAT) | £925 |
| Employee income savings | -£428 |
| Employee national insurance savings | -£18 |
| Average benefit-in-kind tax over term | £118 |
| Net cost/You pay | £596 |
Why Choose The Electric Car Scheme?
Choosing a salary sacrifice provider isn’t just about headline price - protection and simplicity matter.
| Feature | The Electric Car Scheme | Typical alternative |
|---|---|---|
| Employer financial protection | Included as standard | Often optional |
| Protection start | Immediate for most scenarios | Delayed or capped |
| Used EV availability | Yes | Limited |
| Charging via salary sacrifice | Yes | Often separate |
| Excess or usage caps | None | Common |
| Neutral OEM choice | Full market access | Restricted panels |
The focus is on fair access, transparency, and protection, helping employers and employees switch to electric with confidence.
What Employees And Employers Value
Complete Employer Protection removes financial risk if circumstances change
Used EV access helps more employees participate
The Charge Scheme allows EV charging to be salary sacrificed alongside the car
Transparent pricing with no excesses or hidden conditions
The Electric Car Scheme is rated Excellent on Trustpilot, with customers regularly highlighting the clarity of information, helpful support teams, and confidence provided by employer protection.
Common Misconceptions About Electric Car Salary Sacrifice
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Despite its growing popularity, electric car salary sacrifice is sometimes misunderstood. Below are some of the most common myths.. and the reality behind them.
“It Affects My Mortgage Application”
Salary sacrifice reduces your gross salary on paper, but most lenders now understand how salary sacrifice works. Many assess affordability using net income, and EV salary sacrifice is increasingly recognised as a standard workplace benefit. While policies vary between lenders, salary sacrifice does not automatically harm mortgage applications.
“I’m Stuck With The Car For The Whole Lease”
While salary sacrifice is a fixed-term agreement, protections exist for real-life changes. With Complete Employer Protection, cars can be returned early in situations such as redundancy, long-term sickness, or dismissal, without unexpected costs falling on the employer. Resignation is covered after an initial period, providing flexibility where it matters.
“My Employer Pays For Everything”
Salary sacrifice does not mean the employer pays for the car. Instead, the employee funds the lease through a reduction in gross salary, benefiting from tax and National Insurance savings. Employers facilitate the scheme and save on employer National Insurance, but the car remains an employee benefit.
“Only High Earners Benefit”
Higher-rate taxpayers do see larger savings, but salary sacrifice can still benefit basic-rate taxpayers - especially when choosing used EVs. Lower monthly costs, including insurance and maintenance, and predictable budgeting make salary sacrifice accessible across income levels.
Frequently Asked Questions
Can I End My Salary Sacrifice Agreement Early?
Yes. Early termination depends on the reason. Redundancy, dismissal, long-term sickness, or death are covered immediately. Resignation is covered after three months.
What Happens If I Go On Maternity Or Paternity Leave?
Salary sacrifice continues during paid leave. If statutory pay creates a shortfall, Complete Employer Protection applies.
Can Company Directors Use Salary Sacrifice?
Yes, although tax treatment may vary. Independent tax advice is recommended.
Does Salary Sacrifice Affect My Pension?
It can if pension contributions are based on salary, but many employees adjust their contributions to maintain the same level.
Can I Choose Any Electric Car?
Employees typically have access to a wide range of new and used EVs within employer-set limits.
What Happens If The Car Is Damaged?
Insurance is included. Normal wear and tear is expected; damage beyond this is handled through insurance.
Can I Have a Personal Car As Well?
Yes. Salary sacrifice does not prevent you from owning or leasing another vehicle.
How Long Does Delivery Take?
Used EVs can often be delivered within weeks. New EV delivery depends on availability.
Can I Transfer My Car If I Change Jobs?
Salary sacrifice agreements are tied to your employer. If you move jobs, the vehicle is usually returned.
Is Salary Sacrifice Better Than a Traditional Company Car?
Salary sacrifice offers more choice and tax efficiency than a traditional company car, especially for electric vehicles.
Electric car salary sacrifice is one of the most effective ways to make electric driving affordable today. With low BiK rates, built-in protections, and growing access to used EVs, it provides a practical route to lower costs and lower emissions - for employees and employers alike!
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Last updated: 29/05/2025
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.
