Salary Sacrifice

What is an EV Salary Sacrifice scheme?

An electric vehicle salary sacrifice scheme, allows employees to lease a new electric car through their employer.

Read our Salary Sacrifice FAQ guide to understand how it works, with tips for an effective roll-out.

How does EV Salary Sacrifice work?

The process is simple. Employees select a car from a list, and then you deduct the monthly rental cost from their salary.

The important bit is that this deduction comes from their pre-tax income, so it’s before they pay income tax and National Insurance. This means employees may pay less income tax and National Insurance overall.

Employees are required to pay Benefit-in-Kind (BIK) tax. However, for electric vehicles, current UK tax rules apply at a relatively low BIK rate.

Tax rules may change in the future and could affect the overall cost.

This can make EV salary sacrifice schemes more cost-effective than some alternative options

Why should employers offer a salary sacrifice scheme?

Employers may choose to offer an EV salary sacrifice scheme. Potential advantages can include:

Provide an attractive perk for employees, including those who wouldn’t normally be eligible for a company car.

Support safer, more cost-effective and more environmentally friendly travel.

Reduce employers National Insurance contributions.

Reduce the complexities of cash allowances.

Reduce your reliance on the ‘grey fleet’ (which tends to be older and less efficient vehicles).

Cut the cost and carbon footprint of business trips.

The exact financial benefit will depend on individual circumstances, including salary, tax band, and scheme terms.

Important considerations:

Impact on employee take-home pay

Effects on borrowing (e.g. mortgages)

Early termination charges

Suitability for different employees

This information is provided for general guidance only and does not constitute financial, tax or legal advice.

How Virgin Media O2 launched a unified EV salary sacrifice scheme

Ayvens was tasked with creating a unified scheme that supported the integration of Virgin Media O2’s workforce and navigate the unique challenges of the combined organisation.

What to consider before launching a salary sacrifice scheme

An effective supplier is an integral part of a successful salary sacrifice scheme. Our consultative approach can help you answer the key questions before the scheme is introduced – and we can then support you throughout its life as well.

Who will run the scheme? A single point of contact for the leasing company can help ensure the scheme is managed properly and continues to fit your goals – such as restricting choice lists to electric vehicles.Can employees afford the rentals? Although salary sacrifice can be made available to all employees, the monthly payments can’t take their remaining pre-tax income below the minimum wage threshold.How are you managing risk? There are financial risks we can help you manage. For example, you could include early termination cover for monthly payments in case of long-term sick leave, redundancy, resignation or salary reduction.How will it fit with other car schemes? Salary sacrifice can complement a traditional company car scheme, and some employees may be eligible for both. We can help develop a driver portal that meets your business needs; either presenting both schemes together for easy comparison or separating drivers based on their circumstances to avoid confusion.How will you explain the scheme to employees? We can help you introduce the scheme to employees, so you can make them aware that it is a genuine benefit that they should be keen to explore. This can include a range of support materials, such as our employee guide.

Speak to the team today

Our EV Salary Sacrifice scheme lets employees pay for an electric car from their gross salary. If you have more than 1,000 employees in your company, we can help you and your employees go electric. We're ready to help take those next steps with you. Fill in your details below and we'll be in touch to help you navigate a changing world.