Complete Guide to EV Salary Sacrifice UK 2025

What is EV Salary Sacrifice?

EV salary sacrifice is a government-approved employee benefit scheme that allows you to lease an electric vehicle through your employer. The lease cost is deducted from your gross salary before tax and National Insurance, resulting in significant savings of 30-60% compared to personal leasing.

How Does It Work?

For Employees:

Your employer sets up a scheme with a provider
You choose an electric vehicle
Monthly cost deducted from gross salary (before tax)
You receive the car with insurance, maintenance, charger included
Save 30-60% compared to personal leasing
After 3-4 years, return and choose a new car

For Employers:

Partner with a provider (Octopus EV, TECS, Love Electric)
Save 13.8% Employer NI on sacrificed amount
Minimal administration - provider handles everything
Valuable employee benefit at low/no cost

Tax Savings Explained

Savings come from three sources:

1. Income Tax Savings

Basic rate (20%): Save £100/month on £500 lease
Higher rate (40%): Save £200/month on £500 lease

2. National Insurance Savings

Employee saves 12% (or 2% for higher earners)
Additional £60-£10/month saved

3. Low BiK Tax (2%)

Electric vehicles have just 2% BiK rate
£40,000 car = £800/year taxable = £13-27/month BiK tax

Real Example: Tesla Model 3 (£600/month)

Basic Rate Taxpayer:

Tax saved: £120/month
NI saved: £72/month
BiK cost: -£13/month
Net cost: £421/month (save £179/month = 30%)

Higher Rate Taxpayer:

Tax saved: £240/month
NI saved: £72/month
BiK cost: -£27/month
Net cost: £315/month (save £285/month = 48%)

Who is Eligible?

✅ Eligible:

PAYE employees
Earning above minimum wage after deduction
Permanent or long fixed-term contract
UK driving license
Clean credit history

❌ Not Eligible:

Self-employed/contractors
Zero-hours contracts
Below minimum wage after deduction

What's Included?

Most packages include:

✅ Vehicle lease (3-4 years)
✅ Comprehensive insurance
✅ Maintenance & servicing
✅ Breakdown cover
✅ Replacement tyres
✅ Road tax (£0 for EVs)
✅ Home EV charger + installation

You pay: Electricity for charging

Popular Vehicles Available

Budget (£300-450/month):

MG4 EV - 281 mile range
Nissan Leaf - 239 mile range
Vauxhall Corsa-e
Peugeot e-208

Mid-Range (£450-650/month):

Tesla Model 3 - 344 mile range
VW ID.4 - 321 mile range
Hyundai Ioniq 5
Kia EV6 - 328 mile range

Premium (£650-900/month):

Tesla Model Y - 331 mile range
BMW i4 - 365 mile range
Mercedes EQE
Audi e-tron

How to Get Started

For Employers:

Compare providers
Request quotes
Set company policy
Onboarding (2-4 weeks)
Launch to employees

For Employees:

Check eligibility with HR
Calculate savings
Choose a car
Apply through employer portal
Delivery in 3-6 months

Does It Affect My Pension?

It can, but most employers prevent this by:

Maintaining contributions at pre-sacrifice level
Using "pensionable salary" excluding sacrifice

Always ask your employer how they handle pensions.

What If I Leave My Job?

Options:

Transfer to new employer (same provider)
Return car (may have termination fees)
Continue paying personally (lose tax benefits)
Buy the car (if provider allows)

Pros and Cons

Pros:

Save 30-60% vs personal leasing
Everything included
Latest EVs
Low 2% BiK tax
Free home charger
Environmental benefits

Cons:

Reduces gross salary
May affect pension
Early termination fees
3-4 year commitment
Limited to provider's cars
Credit check required

Common Questions

Can directors use it? Some providers allow directors of limited companies.

Does it affect mortgages? Yes - apply for mortgages before starting salary sacrifice.

Typical delivery time? 3-6 months, some stock cars in 4-8 weeks.

More than one car? Yes, if salary supports it.

Compare Top Providers

Octopus EV - Transparent pricing, 4,000 free miles
TECS - Largest provider, 8,000 free miles, charging scheme
Love Electric - Independent broker, used EVs
Tusker - 20+ years experience

See full comparison →

Next Steps

Calculate Your Savings - See exact costs
Compare Providers - Find the best scheme
Get Quotes - Receive personalized quotes

Last Updated: November 2025

Complete Guide to EV Salary Sacrifice UK 2025