Driving electrification with salary sacrifice

“One area that can really drive down emissions and drive up take up of electric vehicles is a salary sacrifice scheme, as the tax savings can be significant. In case you’re not familiar with these schemes, I’ll just provide a quick reminder. What happens is that your employees choose a car from a selection and you then deduct the monthly rental cost from their monthly salary before they pay tax or National Insurance on it.

The clever bit is that there is a built-in incentive to choose an electric vehicle. For most salary sacrifice cars they would have to pay benefit-in-kind (BIK) tax at the same rate as their income tax band, which removes much of the tax efficiency. But with electric cars, the BIK tax rate is significantly reduced – and these lower tax rates are set to stay in place for the next few years at least.

This makes it a very straightforward proposition from their perspective – get a brand-new electric car and pay less tax. In fact, we think this makes salary sacrifice one of the cheapest ways to drive a new electric car.

As you might expect, the consultancy team can help you set up a salary sacrifice scheme that suits your specific business and employee requirements. However, our support doesn’t stop there. We can also help with events, webinars and internal communications to drive engagement.

I remember one customer who launched their salary sacrifice scheme during Covid. This meant there were long lead times and lower-than-expected take up. We worked with the customer to produce webinars and internal communications that promoted a commitment to ‘locking in’ rental prices, which was particularly appealing during a time when interest rates were rising.

Once it was possible for everyone to get back to the workplace, we then ran onsite events to support employee benefits roadshows. These showed drivers the potential savings compared with them sourcing vehicles themselves. The results were dramatic, with the scheme doubling in size over one year – and we hope to see more progress in the years ahead.

If you’d like to explore salary sacrifice as a way to reduce emissions for your employee owned vehicles, please get in touch with our team.