UK Budget 2025: Electric Car Salary Sacrifice Schemes Confirmed Until 2030 - £1.5bn EV Boost Announced
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The UK Budget 2025 has delivered overwhelmingly positive news for employees and employers considering electric car salary sacrifice, with the government confirming continued support for the EV transition whilst introducing restrictions in other areas of salary sacrifice. For anyone considering making the switch to an electric car through The Electric Car Scheme, the message is clear: now is the ideal time to get involved.
Electric Car Salary Sacrifice Schemes Protected Until 2030
The most significant announcement for salary sacrifice electric car schemes is that they remain completely unaffected by the Budget changes. The low Benefit-in-Kind rates for electric vehicles will continue until at least April 2030 (rising gradually to 9% in 2029), allowing employees to save 20-50% on a new electric car compared to traditional leasing or purchasing.
This stands in stark contrast to other salary sacrifice schemes announced in the Budget:
Pension Salary Sacrifice Changes (from April 2029):
National Insurance savings will be capped at £2,000 per year
Any contributions above this threshold will be subject to NI
Income tax treatment remains unchanged
Cycle to Work Schemes:
No changes announced, contrary to rumoured £1,000 caps
This protection for electric car salary sacrifice schemes demonstrates the government's commitment to accelerating EV adoption across the UK, making it one of the most attractive employee benefits available in 2025 and beyond.
£1.5bn Investment in Electric Vehicle Infrastructure
The Budget delivered substantial financial backing for the EV transition, with two major funding announcements:
£1.3bn for Extended Electric Car Grants
The government has committed £1.3bn in additional funding to extend electric car grants through 2026 and 2027. This represents a significant vote of confidence in the sector and will continue to make switching to electric vehicles more affordable for UK drivers.
These grants work alongside The Electric Car Scheme's salary sacrifice programme, creating a double benefit for employees who can combine government support with pre-tax salary deductions to maximise their savings.
£200m for Charging Infrastructure
An additional £200m has been allocated for EV charging infrastructure expansion across the country. This investment directly addresses one of the key concerns for prospective EV drivers and complements our comprehensive guide on EV charging for beginners.
The expanded charging network will benefit drivers using workplace charging facilities and those who charge their electric cars in public, making EV ownership increasingly convenient for all drivers, including those without driveway access.
Pay-Per-Mile Road Tax: What EV Drivers Need to Know
The Budget introduced proposals for a new mileage-based road tax system to replace Fuel Duty, which will affect all electric car drivers from April 2028. Here's what you need to know:
Key Details:
Introduction date: April 2028 (two and a half years away)
EV rate: £0.03 per mile
Plug-in hybrid rate: £0.015 per mile
Annual increases: Rates will rise in line with CPI
Average cost: Approximately £255 per year for drivers covering 8,500 miles
Important Context: The new system charges electric cars at roughly 50% of the fuel duty rate paid by petrol and diesel drivers, maintaining the cost advantage of EV ownership. For drivers currently benefiting from The Electric Car Scheme, this represents fair taxation that still makes electric vehicles significantly cheaper to run than conventional alternatives.
The proposals will be debated and likely refined before implementation, ensuring the system remains equitable for all road users.
Expensive Car Supplement: Excellent News for Premium EV Drivers
One of the most welcome changes in the Budget is the increase to the Expensive Car Supplement (ECS) threshold specifically for battery electric cars.
What's Changing:
Old threshold: £40,000
New threshold: £50,000
Effective date: April 2026
This change means that electric vehicles with a list price between £40,000 and £50,000 will no longer be subject to the additional £410 annual road tax charge that currently applies to "expensive cars" for the first five years of registration.
Affected Models: This benefits drivers choosing popular models through salary sacrifice such as:
Tesla Model 3 and Model Y variants
The threshold increase saves qualifying vehicle owners approximately £2,050 over five years (£410 × 5 years), making premium electric vehicles even more affordable through company electric car schemes.
Energy Bill Savings to Reduce EV Charging Costs
The Budget includes measures to reduce household energy bills through the temporary removal of levies under the Renewables Obligation (RO) scheme. This relief will apply through the 2026-27, 2027-28, and 2028-29 financial years.
Benefits for EV Drivers:
Lower electricity costs for home charging
Enhanced savings when using EV-specific energy tariffs
Improved economics of home charger installations
These energy bill reductions complement The Charge Scheme, which allows employees to salary sacrifice their EV charging costs and save 20-50% on all charging—at home, at work, or in public—making the total cost of electric car ownership even more affordable.
National Living Wage Increase and Tax Band Freezes
National Living Wage Rise
The National Living Wage will increase to £12.71 per hour from April 2026. For employees considering electric car salary sacrifice, this wage increase will provide additional capacity for sustainable transport benefits whilst still maintaining financial stability.
Tax Band Freeze
Income tax rates will remain unchanged, but tax bands will be frozen for three years from the 2028-29 tax year onwards. This "fiscal drag" means more people will move into higher tax brackets as wages increase, which actually makes salary sacrifice schemes even more valuable as they reduce taxable income.
Impact on Salary Sacrifice Calculations:
Higher rate taxpayers benefit most from electric car salary sacrifice
Tax band freeze means more employees will qualify for higher rate savings
National Insurance savings remain available at all income levels
What Doesn't Affect Electric Car Salary Sacrifice
It's important to understand what changes announced in the Budget do not impact The Electric Car Scheme and similar programmes:
Fuel Duty: The 5p cut introduced in 2022 has been extended further, with increases only planned from September 2026. This doesn't affect our customers but highlights the growing cost differential between running an electric car versus conventional vehicles.
Corporation Tax: Changes to corporation tax rates and capital allowances have been announced. The reduction in the writing down allowance main rate from 18% to 14% from April 2026, alongside a new 40% first-year allowance from January 2026, may affect some businesses. However, salary sacrifice schemes remain a tax-efficient employee benefit for employers.
Dividend, Property, and Savings Income Tax: These increases don't impact salary sacrifice arrangements.
Why Now Is the Perfect Time for Electric Car Salary Sacrifice
The UK Budget 2025 has delivered three clear messages for anyone considering an electric vehicle:
1. Electric Car Salary Sacrifice is Here to Stay With 3% BiK rates secured until April 2026 - going to up 9% in 2029 - and salary sacrifice for EVs protected whilst other areas face restrictions, the government has sent a strong signal about long-term support for this benefit.
2. The UK is Accelerating EV Support The £1.5bn investment package—combined with increased thresholds for the Expensive Car Supplement—demonstrates that the government is doubling down on electrification rather than retreating from it.
3. The Economics Favour Early Adoption With energy bill savings, continued grants, expanding infrastructure, and protected tax advantages, employees who join electric car schemes now will benefit from the best possible conditions.
How The Electric Car Scheme Maximises Your Budget 2025 Benefits
The Electric Car Scheme offers the most comprehensive salary sacrifice solution in the UK, allowing employees to take full advantage of the Budget announcements:
Complete Package:
Save 20-50% on any new electric car compared to personal leasing
Benefit from the low BiK rate secured until 2030 - 3% until April 2026, rising to 4%, then 5% (2027), 7% (2028), 9% (2029)
Include home charger installation in your salary sacrifice
Add The Charge Scheme for 20-50% savings on EV charging costs
Protected Against Budget Changes:
Complete Employer Protection from day one
No setup costs for businesses
Trusted 5-star service rated "Excellent" on Trustpilot
Access to the widest range of electric vehicles available through salary sacrifice
Thom Groot - CEO of The Electric Car Scheme Noted:
“The Chancellor's commitment to electric vehicles should be applauded. Further provisions for the Electric Car Grant, investment in electric charging points, and the retention of electric vehicle salary sacrifice in its current form, will help more middle-income working families to access cleaner transport they otherwise couldn't afford, delivering positive health and societal outcomes that benefit everyone.”
“Salary sacrifice schemes have already helped 680,000 drivers make the switch to EVs. Last year, 20% of new cars sold were electric and 40% of them were acquired through these schemes.“Our research shows that employees who have access to EV salary sacrifice schemes are three-four times more likely to make the switch over those without access to financial support - 52% of those who have used EV salary sacrifice are basic rate taxpayers. With 51% growth in uptake during 2024 alone, salary sacrifice is rapidly becoming the largest catalyst of EV adoption in the UK. It's fundamentally reshaping how ordinary working families access clean and affordable transport."
“To go one better, it would have been great to see the Chancellor introduce salary sacrifice for solar panel and heat pump installation, assisting homeowners with rising energy bills and encouraging even more households to make the switch to cleaner and greener energy."
Preparing for Future Changes
Whilst the Budget delivered excellent news for electric car salary sacrifice in 2025, some changes will take effect in future years:
April 2026:
Expensive Car Supplement threshold increases to £50,000
National Living Wage rises to £12.71/hour
Energy bill savings continue
April 2028:
Pay-per-mile road tax introduced at £0.03 per mile for EVs
Tax bands remain frozen (making salary sacrifice even more valuable)
April 2029:
Pension salary sacrifice restrictions begin (EV salary sacrifice unaffected)
April 2030:
BiK rates for electric vehicles will be reviewed (but current low rates secured until then)
For employees joining The Electric Car Scheme on typical 2-4 year leases, your entire lease period will benefit from the current favourable tax treatment before any new charges take effect.
Comparing UK EV Policy to Other Salary Sacrifice Options
The Budget has created a clear hierarchy of salary sacrifice benefits:
Top Tier - Protected and Enhanced:
Electric car salary sacrifice: 3% BiK until April 2026 - rising gradually to 9% in 2029, £1.5bn additional funding, increased ECS threshold
EV charging salary sacrifice: Fully protected, enhanced by energy bill savings
Mid Tier - Unchanged:
Cycle to Work: No changes announced (rumoured caps didn't materialise)
Lower Tier - Restricted from 2029:
Pension salary sacrifice: NI savings capped at £2,000 from April 2029
This makes electric car salary sacrifice arguably the most attractive and secure employee benefit available in the UK for the next five years.
What Employers Need to Know
For businesses considering offering electric car salary sacrifice schemes, the Budget provides several compelling reasons to act now:
Business Benefits:
Attract and retain talent with the UK's most valued employee benefit
Support corporate sustainability goals and reduce carbon emissions
No net cost to the business with Complete Employer Protection
Demonstrate commitment to employee wellbeing
Budget-Specific Advantages:
Government backing through £1.5bn funding package
Long-term policy certainty with low BiK rates until 2030
Enhanced value proposition compared to other salary sacrifice schemes
Protection from future tax changes affecting pensions
Understanding Your Total Savings Under Budget 2025
Let's look at how the Budget affects real savings for employees using The Electric Car Scheme:
Example: Tesla Model 3 through Salary Sacrifice
Standard monthly cost: £650 After salary sacrifice savings (20-50%): £390-£520 Monthly BiK tax (3%): Approximately £60 Net monthly cost: £450-£580
Additional Budget 2025 Benefits:
Expensive Car Supplement saving (from April 2026): £34/month saved (if applicable)
Energy bill savings: Approximately £10-15/month on charging costs
Total monthly benefit: £44-49 in additional savings from Budget measures
Annual Savings:
Pre-tax salary savings: £1,560-£3,120
ECS saving (if applicable): £410
Energy bill savings: £120-£180
Total annual benefit: £2,090-£3,710
These calculations demonstrate why salary sacrifice remains the most cost-effective way to drive an electric car in the UK.
The Environmental and Financial Win-Win
The Budget 2025 reinforces that choosing an electric car through salary sacrifice delivers both environmental and financial benefits:
Environmental Impact:
Support the UK's Net Zero targets
Reduce carbon emissions from daily commuting
Benefit from cleaner grid electricity enhanced by Renewables Obligation support
Contribute to improved air quality in urban areas, including ULEZ zones
Financial Advantages:
20-50% savings on the vehicle cost
Lower running costs compared to petrol and diesel
Protection from future fuel price volatility
Next Steps: Getting Started with The Electric Car Scheme
With the Budget 2025 confirming long-term support for electric car salary sacrifice, now is the ideal time to explore your options:
For Employees:
Check if your employer offers The Electric Car Scheme or encourage them to sign up
Use our savings calculator to see your potential savings
Browse our range of available electric vehicles
Consider adding The Charge Scheme for charging savings
For Employers:
Book a demo to learn how the scheme works
Review the Budget benefits for your employees
Understand the zero net cost to your business
Join thousands of UK companies already offering this benefit
A Strong Vote of Confidence in Electric Vehicles
The UK Budget 2025 represents a strong endorsement of electric car salary sacrifice schemes, setting them apart as protected and enhanced employee benefits whilst other areas face restrictions. The £1.5bn investment package, combined with the increased Expensive Car Supplement threshold and continued low BiK rates until 2030, creates an unprecedented opportunity for employees and employers to benefit from electric car schemes.
For anyone considering making the switch to electric, the message from government is clear: electric car salary sacrifice is here to stay, and now is the best time to get involved.
With The Electric Car Scheme, you can take full advantage of the Budget's benefits whilst enjoying the UK's most comprehensive and trusted salary sacrifice solution. From day-one employer protection to access to any electric car of your choice, plus the ability to salary sacrifice your charging costs through The Charge Scheme, we make the transition to electric simple, affordable, and secure.
Ready to start saving? Calculate your potential savings today or contact our team to learn more about how The Electric Car Scheme can help you benefit from the UK's most protected and enhanced employee benefit.
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The information provided on this blog is for general informational purposes only and should not be construed as tax advice or accountancy services. The information provided in this blog is speculative - and cannot be construed as an accurate reflection of the content of the actual budget - these predictions are subject to change. We are not qualified accountants or tax advisors, and nothing on this site should be relied upon as professional advice tailored to your specific circumstances. Tax laws and regulations are complex and subject to change, and individual situations vary considerably. For specific guidance regarding your tax obligations, financial planning, or accounting matters, we strongly recommend that you consult with a qualified accountant, tax advisor, or other appropriate professional who can assess your particular situation. We accept no liability for any loss or damage arising from reliance on the content provided on this blog.
Last updated: 24/11/2025
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.
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