Image representing the hero content

What is a salary sacrifice scheme for electric cars?

There are many savings you can benefit from by making the switch to an electric car.

Running costs are reduced compared to petrol or diesel alternatives, and charging will generally be cheaper than refuelling at the pump. Driving an electric car on a salary sacrifice scheme is another great way to save a significant chunk of money. There’s plenty to get your head around when it comes to salary sacrifice schemes, including the benefits and how it works for used EVs. In this comprehensive guide, CarSupermarket’s experts talk you through everything you need to know about salary sacrifice schemes for electric cars.

Return to the EV hub

How does salary sacrifice for electric cars work?

A salary sacrifice scheme for an electric car means you make a monthly payment towards leasing an EV – with the money taken from your gross salary.

This means the money is paid before income tax or national insurance is deducted from your salary, leading to savings for both employees and employers.

In salary sacrifice schemes, companies lease electric cars from a supplier. Employees are then offered the option to lease the car in exchange for a monthly payment from their salary – hence the name ‘salary sacrifice’.

Employees will also be responsible for HMRC taxes on the electric car salary sacrifice scheme. This is known as Benefit in Kind (BiK) tax. The rate for this is lowest for electric cars, so you’ll only pay tax on 2% of the car’s value. This rate is set to rise in 2025, but only by a few percent over the course of several years.

Companies can opt for a fully maintained contract, which will mean that the electric car is serviced, repaired, and MOT tested by a third party. The schemes generally last between two and four years and mean you can use your EV for both business and personal trips.

EV salary sacrifice is the same concept as other schemes workplaces typically offer, like the cycle-to-work scheme or a pension scheme - you can only benefit from a salary sacrifice scheme if your company offers one.

Road tax guide for electric cars.

A salary sacrifice scheme for an electric car shouldn’t be confused with company cars, which we’ve covered in more detail along with BiK rates, in our road tax guide for electric cars.

Read more

Electric car salary sacrifice example

If you’re still wondering how an electric car salary sacrifice would actually work, we’ve put together an example so you can visualise the savings.

  • You’ve found a used Tesla Model 3 for £300 per month

  • On a salary sacrifice scheme, you’ll pay £240 per month (if you’re on a 20% income tax rate)

  • If you’re on a 40% income tax rate, you’ll pay £180 per month

  • You’ll also pay Benefit-in-Kind (BiK) tax. For a Tesla Model 3, this would typically be between £30 and £40

Image to represent the content

What are the benefits of an EV salary sacrifice scheme?

For employees

  • Payments are made from your salary before income tax and national insurance, saving you money
  • Payments are fixed and tax free
  • There’s no initial up front cost, which can be a sticking point for many people
  • Many schemes cover insurance and maintenance costs like services, repairs, and MOTs
  • You may be able to afford more expensive electric cars
  • Electric cars typically have lower running costs than petrol or diesel cars
  • You’ll pay lower Benefit in Kind (BiK) rates on electric cars

For employers

  • You’ll save on Class 1A National Insurance contributions (NIC)
  • It’s a significant company benefit, potentially improving employee recruitment and retention
  • Business mileage reimbursement costs can be reduced
  • Use of EVs can support social responsibility goals

Salary Sacrifice for Buying a Used EV

In recent years, the popularity of electric vehicles (EVs) has surged, and with it, various ways to make them more affordable. One such method is salary sacrifice, an arrangement where you give up part of your salary in exchange for a benefit, like driving a used EV. This can be an attractive option for many, offering potential tax savings while allowing you to drive a more eco-friendly vehicle. However, before jumping in, it's important to understand how salary sacrifice works, the benefits, and the potential drawbacks. Below, we’ve answered some of the most common questions to help you decide if this option is right for you.

Can I buy a used electric car on salary sacrifice?

Is salary sacrifice only for electric cars?

Is electric car salary sacrifice worth it?

Sell or part ex your car today

There has never been a better time to sell or part-ex your car