EV Salary Sacrifice Explained: Complete UK Guide 2025

What is EV Salary Sacrifice?

EV salary sacrifice is an employee benefit scheme where you agree to give up part of your gross salary in exchange for an electric vehicle. Because the exchange happens before tax and National Insurance are calculated, you save on both.

How It Works

1. Choose Your EV: Select from the provider's available vehicles
2. Salary Exchange: Agree to reduce your gross salary by the monthly lease cost
3. Tax Savings: Pay less income tax and National Insurance
4. Drive Away: Receive your EV with insurance, maintenance, and often a home charger included

Key Benefits

• Tax Savings: Save 30-60% compared to personal leasing depending on your tax band
• All-Inclusive: Insurance, maintenance, breakdown cover, and tyres included
• No Deposit: Usually no upfront costs
• Fixed Monthly Cost: Predictable budgeting
• Environmental: Reduce your carbon footprint

Who Can Use It?

Most UK employees can use salary sacrifice if:

• Your employer offers the scheme
• You earn above minimum wage after the sacrifice
• You're not in your notice period

Tax Efficiency

Electric vehicles benefit from:

• 2% Benefit-in-Kind (BiK) rate (2024/25)
• Frozen at 2% until 2028
• Compared to 30%+ for petrol/diesel cars

This makes EVs exceptionally tax-efficient for salary sacrifice.

Example Savings

For a £50,000 earner (40% tax):

• Monthly lease cost: £500
• Tax saving: £200
• NI saving: £60
• BiK tax: -£42
• Net cost: £282/month

That's a 44% saving compared to leasing personally!