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What is electric car salary sacrifice?

The Electric Car Salary Sacrifice Scheme is a benefit offered by employers to allow employees to lease an electric vehicle (EV) through salary sacrifice, which means employees agree to give up part of their salary in exchange for using an electric car.

Here’s how it generally works:

  1. Salary Sacrifice: Employees agree to reduce their gross salary by a fixed amount to cover the cost of leasing an electric car. This amount is typically deducted before tax, meaning the employee could benefit from lower income tax and National Insurance contributions.

  2. Leasing the Vehicle: The employee gets to drive a new electric vehicle for a set period (often 2-4 years), with a monthly payment that covers the lease cost and, in many cases, other running costs like insurance, road tax, maintenance, and charging.

  3. Tax Benefits: Because the salary sacrifice is deducted from the employee’s gross pay (before tax), the scheme can reduce their taxable income, which lowers the overall tax burden. This could lead to savings on income tax and National Insurance contributions.

  4. Employer Contributions: In some cases, employers might also contribute to the scheme, either by paying for some of the lease or covering the cost of charging infrastructure (like home charging points).

  5. Green Benefits: Since electric cars are generally seen as more environmentally friendly, employees may be contributing to a company’s sustainability goals by participating in the scheme.

Key Benefits:

  • Lower Taxable Income: Reducing your taxable salary means you pay less tax and National Insurance.
  • Convenience: The scheme often covers all running costs, making it simpler and less stressful for employees compared to owning or leasing a car privately.
  • Access to a New EV: Employees can drive a new, fully-electric car without the high upfront costs of buying one.
  • Sustainability: Encourages the use of electric vehicles, which is better for the environment.

 

***this information, is purely for 'information' purposes, please carry out your own research***