Electric car salary sacrifice scheme benefits

An electric car salary sacrifice scheme can be a more affordable way to drive an electric vehicle (EV). Here’s how it works, what it may include and the potential benefits for you and your employer.

​What is an electric car salary sacrifice scheme?

With a salary sacrifice scheme, you give up part of your gross salary - your pay before tax and National Insurance - in return for an electric car.

Your employer takes the monthly cost from your gross salary before tax and National Insurance are worked out. Because the car is provided as a non-cash benefit, this can reduce the amount of tax and National Insurance paid, depending on your circumstances.

How does electric car salary sacrifice work?

The scheme works in the same way as other salary sacrifice arrangements, like the cycle to work scheme or a pension scheme.

Your employer leases an electric car from a leasing company and offers it to you as an employee benefit. In return, you agree to give up a set amount of your salary each month. The lease payment is taken from your gross salary before Income Tax and National Insurance are calculated. Most schemes also include a maintenance package from a third-party provider. This will usually cover routine servicing including tyres, repairs and MOT tests.

Your pay after the salary sacrifice cannot fall below the National Minimum Wage. If it would, your employer must decline your application. You can normally only stay in the scheme while you work for the company. However, many leases include protection for certain life events, such as leaving the business, redundancy, maternity leave or long-term sickness. Cover varies by provider, so make sure you check the terms of your scheme before you apply.

What is the benefit of electric car salary sacrifice?

The scheme can offer useful savings and make it easier to move to an electric car. The exact benefit will depend on your salary, tax position and the scheme available through your employer.

Potential benefits of EV salary sacrifice for employees:

• You may save Income Tax and National Insurance because payments are taken from your gross salary

• An electric car can cost less to charge than a petrol or diesel car costs to fuel

• Your employer and scheme provider manage the arrangement, which can make the process simpler

• There is usually no large upfront payment

• Electric cars currently have lower Benefit-in-Kind (BiK) tax rates than petrol or diesel cars

Potential benefits of EV salary sacrifice for employers:

• Potential savings on Class 1A National Insurance contributions

• A stronger employee benefits package

• Support with attracting and retaining employees

• A practical way to help employees choose lower-emission travel

• Potentially lower business mileage reimbursement costs

• Support for wider sustainability and corporate responsibility goals.

What is included in electric car salary sacrifice schemes?

I’m getting a car through salary sacrifice, what do I need to pay for?

Your employer pays the leasing company each month and takes your agreed contribution from your salary before tax.You will also pay company car tax based on the vehicle’s Benefit-in-Kind (BiK) rate.

Depending on your employer’s policy, you may need to pay for the electricity used to charge the car at home or at public chargepoints.

Depending on your employer’s policy, you may also be responsible for electric Vehicle Excise Duty (eVED). Announced in the Autumn 2025 Budget, eVED is due to apply from April 2028 as a mileage-based charge for battery electric vehicles. The rate is expected to be 3p per mile for fully electric vehicles and 1.5p per mile for plug-in hybrids. From 2029/30, the rates are expected to increase in line with inflation.

Electric car BiK rates

Benefit in Kind (BiK) is the tax you pay on certain non-cash benefits provided by your employer. A company car is one example, because it has a financial value and can usually be used for personal journeys, including commuting.

EV BiK Rates for EV’s are set to increase annually:

• 2026/27: 4%

• 2027/28: 5%

• 2028/29: 7%

• 2029/30: 9%

You can estimate your annual BiK tax in two steps:

1. P11D value of the car × BiK rate = taxable value

2. Taxable value × your Income Tax rate (for example, 20% or 40%) = annual company car tax

The P11D value is usually the manufacturer’s list price, including VAT, delivery charges and any optional accessories. It does not include Vehicle Excise Duty (often called road tax) or the first registration fee.

The BiK rate is linked to the car’s CO₂ emissions. This is why electric cars are taxed at a much lower rate than most petrol and diesel cars. For the latest and future BiK rates

check the government website. 

Not sure what terms such as ‘company car’, ‘salary sacrifice’, ‘BiK’ or ‘emissions’ mean? Take a look at our jargon buster. Confused about what ‘company car’, ‘salary sacrifice’, ‘BiK’ and ‘emissions’ mean? Check out our jargon buster.

Electric car salary sacrifice example

What rules affect salary sacrifice?

Salary sacrifice schemes are covered by UK rules called Optional Remuneration Arrangements (OpRA), introduced under the Finance Act 2017. These rules apply when an employee gives up part of their salary or cash pay in return for a benefit. Cars with CO₂ emissions of 75g/km or less, including battery electric vehicles, are exempt from the main OpRA rules. This means tax is based on the car’s standard BiK rate rather than the salary you give up. Electric cars currently have especially low BiK rates.

Cars with CO₂ emissions above 75g/km are fully covered by the OpRA rules. Tax is charged on whichever is higher: the salary you give up or the car’s BiK value. For many petrol and diesel cars, the salary given up is higher, which can remove most or all of the tax saving and make salary sacrifice less attractive.r