Considering an Electric Vehicle? Explore the Benefits of Salary Sacrifice Schemes
If you’re thinking about switching to an electric vehicle (EV), you may have heard about salary sacrifice schemes. These schemes can make getting into an EV easier and more affordable. In this expanded guide, we’ll explore what salary sacrifice schemes are, their benefits, how to introduce them, and whether they’re a better option than buying an EV outright.
Understanding Salary Sacrifice Schemes
Salary sacrifice schemes are a great way to give back to your employees. Employees will agree to receive less salary in exchange for non-cash benefits. These benefits can range from company cars to childcare vouchers or extra contributions to a pension plan. By opting into our salary sacrifice scheme for an EV, employees agree to give up a part of their pre-tax salary in return for the use of an electric car. This switch can lead to savings on income tax and national insurance contributions, making it financially appealing. They can take on a brand-new, fully-maintained electric vehicle for a fraction of running their older diesel car!
How Does An Electric Vehicle Salary Sacrifice Scheme Work?
An electric vehicle (EV) salary sacrifice car scheme works by reducing your wages in exchange for an electric car. The employer agrees to take the amount from your monthly salary and put it towards leasing the EV.
Each month, this small amount is deducted from your salary to account for the car payments; this will continue until the contract ends.
What Are The Benefits Of An Electric Car Salary Sacrifice Scheme?
Let’s take a look at the many benefits of investing in an electric car salary sacrifice scheme:
1. Tax Savings
With an electric salary sacrifice scheme, you can benefit from tax savings due to reducing your taxable income. This will mean you can save vast amounts on income tax and national insurance contributions and have the added benefit of an electric car.
2. Cost Efficiency
By applying for a salary sacrifice scheme, you can purchase an EV at a much more cost-efficient rate than purchasing outright. Whilst electric cars are highly desirable; they can be hard to afford. A salary sacrifice scheme makes them cost-effective, as you’ll pay for the vehicle in cheaper monthly instalments instead of a large lump sum.
3. Convenience
Applying for a salary sacrifice scheme is much more convenient than applying for a loan or leasing an electric vehicle. If your company offers a salary sacrifice scheme, the chances are that they’ll also have professionals that can advise you on the whole process.
4. Environmental Benefits
As electric vehicles are more environmentally friendly, you’ll be helping to reduce your carbon footprint. You can also take advantage of government incentives such as the Electric Vehicle Homecharge Scheme (EVHS), which helps to reduce the costs of installing a charging station at your home.
5. Long-Term Savings
Opting for an electric car salary sacrifice scheme can save money in the long term as electric vehicles are more fuel efficient and require less maintenance than traditional cars. You can even save up to 45% on motoring costs!
How Do I Apply For An Electric Salary Sacrifice Scheme?
If your employer offers a salary sacrifice scheme, you’ll need to submit a request and provide supporting documents such as proof of identity and proof of address. Once the application is accepted, you can choose an electric car from various eligible vehicles.
To apply for an EV salary sacrifice scheme, discuss the option with your employer and submit any necessary documentation, such as proof of identity and a current address. Remember, these schemes are not available to self-employed individuals, and you must ensure that your post-sacrifice salary still meets national minimum wage requirements.
Please note you can only opt-in for a salary sacrifice scheme if you are over 21 and in employment. Unfortunately, this electric car scheme is not available for self-employed individuals. If you’re a sole trader looking to introduce salary sacrifice, take a look at our blog here to find out all you need to know.
How Does An Electric Car Salary Sacrifice Scheme Benefit Employees?
The amount of salary sacrifice is calculated by your employer and is typically a fixed percentage of your gross salary. The amount you sacrifice is deducted from your pay before tax, and National Insurance contributions are calculated according to this.
As of the 2024/25 tax year in the UK, there is no specific minimum amount for salary sacrifice arrangements, but the salary must not fall below the National Minimum Wage after the sacrifice. The amount you can sacrifice will depend on your circumstances and salary.
If you’re a higher earner, you may also be able to take advantage of the government’s pension tax relief scheme. The maximum pension contribution limit is generally £40,000 annually, which could be lower for high earners due to the tapered annual allowance. Higher and additional rate taxpayers can claim up to 40% or 45% tax relief on pension contributions, respectively.
Here at Fleet Evolution, we believe in making the salary sacrifice process as simple as possible. For more information on investing in a scheme for your company, please get in contact with one of our customer service experts today.
Benefits Of Salary Sacrifice For Employers
- Attracts and Retains Talent: Offering a salary sacrifice scheme can help attract and retain top talent by enhancing the benefits package with cost-effective, desirable options like EVs.
- Demonstrates Commitment: By providing an EV salary sacrifice scheme, employers show a commitment to supporting their employees with environmentally friendly and economical vehicle options.
- Reduces Environmental Impact: Implementing an EV scheme helps lower the overall carbon footprint of the company, aligning business operations with sustainability goals.
- Saves on Taxable Income: Since the sacrificed salary is pre-tax, the employer’s taxable income is reduced, resulting in lower overall payroll taxes.
What Are The Disadvantages Of EV Salary Sacrifice?
Now we’ve discussed the benefits of salary sacrifice schemes, it’s important to be aware of the potential disadvantages:
Less Take-Home Pay
As expected, opting for a salary sacrifice scheme will reduce the amount of take-home pay that an employee receives. It’s important to calculate how much of an effect this could have on a personal budget.
Set Duration of Contract
Salary sacrifice schemes usually have set terms and are often not flexible. This could be a disadvantage if you’re looking to move companies or change jobs during the contract.
Which Electric Cars Are Available For Salary Sacrifice?
This will depend on your chosen provider, as other salary sacrifice schemes will offer different brands. At Fleet Evolution, we aim to make electric cars more accessible and invite more to join the electric revolution; that’s why we offer every car available on the UK EV market! For more information and quotes, please take a look at our quote engine. Alternatively, you can contact Driverline directly at driverline@fleetevolution.com.
We hope this blog has helped you understand how an electric car salary sacrifice scheme works and the benefits for employers and employees. If your company offers a salary sacrifice scheme, it’s worth considering, as it could be a great way to get behind the wheel of an EV without paying out of pocket!
Electric Car Salary Sacrifice FAQs:
We’ve done our best to try and answer some of the most common questions regarding electric car salary sacrifice schemes below:
Is It Worth Getting An Electric Car On Salary Sacrifice?
Yes! Getting a new electric car on salary sacrifice can help to significantly reduce your carbon footprint and save on tax contributions. Car lease companies will offer different options to suit all budgets.
Can You Get A Tesla On Salary Sacrifice?
This depends on the company you’re working with. Each leasing company will offer different electric vehicles, so it is important to research beforehand if you’re after a specific brand, such as Tesla. We recommend speaking to a customer service team for more information on vehicle brands and specific monthly payments.
Is It Better To Salary Sacrifice Or Buy A Car?
This depends on your unique situation, as there is no one size fits all answer. However, if you’re looking to convert to an electric vehicle but can’t afford the outright price, then salary sacrifice can be a great way to pay for it in monthly instalments. A small amount is taken from your gross salary before paying tax. This means that you will have less take-home pay but pay fewer total tax contributions.