Independent Vehicle Insurance lets employees with a lease car on the scheme, arrange their own comprehensive car insurance and pay for it through salary sacrifice. It works the same way as The Charge Scheme: you reimburse the employee for the cost of their policy, and the same amount, plus our service fee, comes out of their gross salary.
There’s no cost to your company, and nothing changes for anyone’s pay until an employee chooses to use it.
Who can use it?
- Lease cars only. Subscription cars already include insurance.
- The employee must not have taken insurance through the scheme. A scheme policy runs for the full lease and can’t be cancelled to switch.
- At least 12 months must be left on the lease when the policy starts.
- The policy must be fully comprehensive and cover the scheme car only.
- The total salary sacrifice must stay within the employee’s limit and keep their pay above National Minimum Wage.
We check all of this when the employee sends us their insurance schedule.
What does the employee do?
- Buys their own comprehensive policy, or moves an existing policy onto their scheme car.
- Uploads the insurance schedule in their employee portal before the policy starts.
- Sends their insurance certificate to the lease company.
We validate the schedule and add it to your next payroll instruction. If the schedule reaches us after the payroll cut-off, the sacrifice starts the following month and the employee pays the first month themselves. It can’t be backdated.
What does payroll need to do?
Each policy creates two payroll lines:
| Line | What it is |
|---|---|
| Gross salary sacrifice | Policy cost plus our service fee, taken from gross pay. Included in the employee’s combined gross sacrifice with their car and any Charge Scheme amount. |
| Net reimbursement | The policy cost only, added back to net pay. |
Both lines will be in your monthly Scheme Report. If you only see one of them for an employee, please get in touch.
You may see “(Multiple)” in the calendar month column. This just means the car and the insurance are being collected for different months in the same payroll run. It isn’t an error.
How much does it cost?
Our service fee is 50% of the employee’s income tax rate:
- 10% of the policy cost for basic rate taxpayers
- 20% for higher and additional rate taxpayers
Example, £50 a month policy, basic rate taxpayer:
| Gross salary sacrifice (policy + fee) | £55.00 |
| Reimbursed to employee through net pay | £50.00 |
| Amount kept by the employer and paid to us on your monthly invoice | £5.00 |
The employee still saves around 21% on their insurance after the fee for a basic rate taxpayer.
What happens at renewal?
Insurance renews every year, so the employee needs to send us a new schedule each time.
- We remind them 30 days before renewal.
- If the price changes, we update their salary sacrifice and send you an updated schedule. It will show as “Change” in your Scheme Report.
- If no new schedule arrives, the sacrifice continues at the old amount for up to six months while we chase them. After six months we remove them from Independent Vehicle Insurance and the sacrifice taken during that period is added back to their gross pay. This reverses the tax and NI savings for those months.
The employee’s car isn’t affected. They keep the lease and arrange their insurance directly from then on.
If a policy is cancelled or lapses during the year, the employee must tell us straight away and we’ll stop the sacrifice from that date.
Are we responsible for the employee’s insurance?
No. The policy is between the employee and their insurer. We check that a comprehensive policy is in place for the scheme car, but we don’t advise on insurers or whether the level of cover is right.
Do you have to offer it?
No. It’s a single setting on your company account, which is confirmed during scheme onboarding. If it’s switched off, your employees won’t see the option in their portal.
You can change your mind at any time by contacting your account manager or support@electriccarscheme.com. If you switch it off, employees already on a policy continue until the end of their current policy term.