What are the perks of buying an electric car through salary sacrifice?

25th April 2023

We asked Jonathan Watts-Lay, Director, WEALTH at work, about the perks of buying an electric car through salary sacrifice.

He comments; “Paying for an electric vehicle through a workplace salary sacrifice scheme can offer considerable tax benefits. Salary sacrifice electric car schemes typically enable employees to lease an electric car and pay for it monthly through pre-tax salary. This means employees pay less income tax and national insurance, making it one of the most cost-effective ways to drive an electric car. Leasing in this way gives higher rate tax payers a saving of 40% in income tax and 2% in National Insurance. Employees who pay tax at the basic rate can make a saving of 20% in income tax and 12% in National Insurance. Paying for a car through salary sacrifice will mean that it attracts a tax charge as a ‘benefit in kind’. The benefit in kind value applied to electric cars is currently 2%, meaning for many the income tax and National Insurance saving outweighs this relatively small ‘benefit in kind’ cost. This tax charge is also a fraction of the amount of tax drivers of petrol, diesel and hybrid cars pay, which can be up to 37%.

Leasing an electric car this way also means that it may be possible to get a good deal due to the buying power and discounts larger employers may be able to secure from buying in bulk, but this may mean that you have less choice in the vehicles available. Electric vehicles generally also work out cheaper to service and maintain than the equivalent petrol and diesel models, although they can be more expensive to insure.

If you are going to move to an electric car, paying for it through salary sacrifice can be a great option due to the savings that can be made. It really is one of the most cost-effective ways to drive an electric car.”