Electric Vehicle Salary Sacrifice Scheme

An electric car salary sacrifice scheme allows employees to exchange part of their gross salary for a brand-new electric vehicle. Because the payment is taken before Income Tax and National Insurance are applied, employees can benefit from significant tax savings compared with traditional car lease deals.

Salary sacrifice schemes are becoming increasingly popular in the UK as businesses look for new ways to support employees while also helping reduce carbon emissions through electric vehicles.

With salary sacrifice, the monthly lease cost of the electric vehicle is deducted from an employee’s gross salary before tax. This reduces taxable income and therefore lowers Income Tax and National Insurance contributions.

Employees can choose from a range of electric vehicles available through electric car leasing deals, and the vehicle is then provided as an employee benefit through their employer.

Eligibility depends on employment status and salary. Employees must remain above the National Minimum Wage after the salary deduction is applied. Employers can choose which employees are eligible based on company policy.

LetsLease works with businesses to help determine eligibility and ensure the scheme operates correctly for both employees and employers.

A personal credit check is not required.

This can make salary sacrifice an attractive option for employees who may not qualify for traditional personal car leasing.

The level of tax savings depends on your salary, tax band and the Benefit-in-Kind rate of the vehicle. Electric vehicles benefit from very low BIK rates in the UK, which makes them particularly tax-efficient through salary sacrifice.

Because the payments are taken before tax, many employees find that their effective monthly cost is significantly lower than standard leasing options.

If an employee leaves their job, goes on maternity leave or is made redundant, the scheme typically includes protection that allows the vehicle to be returned early. At LetsLease, this protection normally applies after the first six months of the agreement, subject to terms and conditions.

Many salary sacrifice schemes include early return protection for major life events such as redundancy, long-term sickness or maternity leave. This provides reassurance for both employees and employers if circumstances change during the lease.

Most salary sacrifice schemes include servicing, maintenance, tyres, breakdown cover and road tax within the monthly deduction. This makes it easier for employees to budget with one fixed monthly cost.

Electric vehicles benefit from significantly lower Benefit-in-Kind tax rates compared with petrol or diesel cars. This makes EVs particularly attractive within salary sacrifice schemes because the tax savings can be substantial.

Businesses can explore a wide range of vehicles through electric car leasing deals to find the right option for employees.

For many drivers, salary sacrifice can be cheaper than traditional personal leasing because the payments are taken from gross salary before tax. This reduces Income Tax and National Insurance contributions, lowering the effective monthly cost.

You can still compare alternative options through standard car leasing deals if salary sacrifice is not available through your employer.

Most salary sacrifice schemes provide access to a wide range of electric vehicles across multiple manufacturers. Employees can choose from compact EVs, family SUVs and premium electric models depending on availability and scheme rules.

Salary sacrifice leases typically run for between two and four years depending on the scheme provider and employer preferences. The lease length can vary depending on the vehicle chosen and the terms agreed with the employer.