How Do Electric Car Salary Sacrifice Schemes Work?
Electric cars aren’t just about going green, as they're quickly becoming a smart financial choice. With rising fuel prices and increasing taxes on petrol and diesel vehicles, more employees are turning to salary sacrifice schemes as an affordable way to get behind the wheel of a new electric car. Keep reading to learn how it works and whether it’s the right fit for you.
What Is a Salary Sacrifice Scheme?
A salary sacrifice scheme is a setup where you give up part of your gross salary in exchange for leasing an electric vehicle. Because the deduction happens before tax, you pay less in Income Tax and National Insurance.
Employers benefit too, saving on National Insurance contributions. This makes it an attractive option for promoting greener transport without extra cost. Some providers, including Ezoo, support both businesses and employees with flexible electric car salary sacrifice schemes that cover everything from insurance to maintenance in one monthly payment.
Why Electric Vehicles Make Sense
One of the biggest incentives for electric vehicles is the low Benefit-in-Kind (BiK) rate. For the 2025/26 tax year, the BiK rate for fully electric cars is 3%. This is significantly lower than rates applied to petrol or diesel cars, where the BiK can be 20% or more, depending on emissions.
Looking ahead, the government has announced that the BiK rate for electric vehicles will gradually rise by 1% each year, reaching 5% by the 2027/28 tax year. Even with these increases, EVs remain a far more tax-efficient choice over traditional cars, especially when accessed through salary sacrifice.
What’s Included in the Package?
When your employer partners with a provider, your monthly payment covers more than just the car itself. Their packages typically include:
- Fully comprehensive insurance
- Road tax
- Servicing and maintenance
- Breakdown cover
- Tyres and repairs
This means you don’t need to worry about unexpected bills or juggling multiple providers. Everything is rolled into a fixed monthly cost that comes straight out of your salary, making it simple to manage.
How It Works in Practice
Once your employer is signed up with a provider, you choose from a selection of electric vehicles, where both new and nearly new models are usually available. After you’ve picked your car, the monthly lease cost is deducted from your gross salary.
You don’t need to pay a deposit, and there’s no need to take out a loan. Lease terms typically run between two and four years. At the end of the lease, you return the car, upgrade to a new one, or in some cases, buy it if that option is available.
What to Consider Before Joining
As with any financial commitment, there are a few things to weigh up. Reducing your gross salary could slightly affect your pension contributions or borrowing power for a mortgage or loan. It’s also important to understand the scheme’s early exit terms. If you leave your job, you'll usually need to return the car or settle the remaining balance. It’s worth confirming these details before you commit.
Making the Switch Work for You
Salary sacrifice schemes take the hassle out of driving electric. You save on tax, avoid large upfront costs, and enjoy the ease of having everything included in one payment. Even with the planned BiK increases over the next few years, EVs still offer a more affordable and future-ready way to drive.
