Salary sacrifice for electric vehicles (EVs) is a government-backed scheme that allows employees to lease a brand-new electric car through their employer - using a portion of their gross salary (before tax and National Insurance). This means employees can drive a fully maintained EV while saving 20–50% on the cost compared to leasing privately.
For employers, it's a hassle-free way to boost your benefits package, support green initiatives, and promote employee wellbeing, with minimal admin required.
How It Works
Here’s a simple breakdown of how salary sacrifice for EVs works:
🚗 1. Choose a Car
Employees browse and select from thousands of brand-new electric vehicles across a wide range of trusted brands and leasing providers.
📝 2. Set Up the Salary Sacrifice
They agree to exchange part of their gross salary in return for an all-inclusive EV lease. This deduction is made before tax and National Insurance contributions are calculated.
💷 3. Save on Tax
Because the lease payments are taken from gross salary, the employee pays less Income Tax and National Insurance. This results in substantial savings, depending on tax band and vehicle choice.
📉 4. Benefit in Kind (BiK) Tax
What is BiK?
Benefit in Kind (BiK) is a tax you pay when your employer provides you a non-cash benefit (like the use of a company electric vehicle). Rather than paying tax on cash salary, BiK taxes the value of the benefit itself. If you use the car for private purposes (including commuting), it counts as a taxable benefit.
Why EVs Enjoy Low BiK Rates
Because electric vehicles produce zero tailpipe emissions, the UK's BiK rate for fully electric cars is currently only 3% of the vehicle’s value (known as the P11D value) for the 2025–26 tax year. That's a fraction of the rates for petrol or diesel alternatives, significantly reducing the extra tax you pay.
The BiK system offers a sliding scale based on the car's emissions. The low EV rate reflects government policies designed to encourage greener transport choices while still ensuring everyone contributes fairly.
How it works in practice:
- The car’s listed P11D value (price + VAT + extras but excluding road tax) is multiplied by the BiK rate (3% for EVs).
- This gives the taxable benefit amount (e.g a £40,000 car × 3% = £1,200).
- You pay tax on that amount based on your personal Income Tax band (e.g 20% or 40%) so, at 20%, you'd pay £240 per year, or £20 per month
💼 5. One Simple Monthly Cost
The scheme bundles multiple costs into one predictable monthly deduction. This often includes:
- Insurance
- Maintenance and servicing
- Breakdown cover
- Road tax
- Optional extras (like tyre protection or a home charger)
Why It’s So Popular
Employees love the scheme for its convenience and cost savings, and employers love it for its simplicity and sustainability impact.
Benefits for Employees:
✅ No upfront deposit
✅ Fixed monthly payments
✅ Big savings compared to leasing privately
✅ A new car every few years
✅ All-inclusive package—just add electricity!
Benefits for Employers:
🌱 Support sustainability and net-zero goals
💙 Enhance employee wellbeing and engagement
📈 Attract and retain top talent with a forward-thinking perk
🛠️ Minimal admin: ECS handles onboarding, contracts and payroll setup
In Summary
Salary sacrifice for electric cars is a win-win: employees get a brand-new EV at a lower cost with fewer hassles, while employers can offer a highly valued benefit without adding significant complexity or cost to their business.
It’s one of the simplest, most cost-effective ways to drive positive change; for the people and the planet.