Are Electric Cars Worth the ­Salary Sacrifice?

Electric cars have been around for over a century, which may surprise you. Unfortunately, they’ve only just risen to the fame they deserve, better late than never though. On the other hand, salary sacrifice has only been around for the last 20 years or so, gaining huge popularity at the beginning of the last decade before waning off following some government changes. Now, it’s on the up again, thanks to the solid combination with electric vehicle salary sacrifice schemes. Why is this? Are electric cars worth the salary sacrifice? Are there significant savings through salary sacrifice?

First, What’s Salary Sacrifice?

Salary sacrifice is a way of an employer offering more benefits at no cost to them. This lets them give their employees access to a whole raft of benefits they fund themselves via a payroll deduction. It’s crucial to note, this is taken from their GROSS salary before tax and NI is deducted.

This means the employee saves income tax and national insurance. Sometimes they can make other savings such as VAT or corporate discounts. However, while HMRC allows such arrangements, many involve taxable benefits as a result of your salary sacrifice arrangement. For example, if you create a salary sacrifice arrangement for a gym membership, the employee saves tax and national insurance (and corporate discounts) but pays a ‘benefit tax’ equivalent to the tax saving. This essentially means that the saving is just national insurance. A salary sacrifice scheme is also considered inflexible; for instance, you couldn’t have a PAYG (pay as you go) gym subscription via salary sacrifice and then suspend membership partway through the year.

How Does This Affect Cars?

The savings upfront on car salary sacrifice is huge with a car salary sacrifice scheme. The employee saves not only tax and NI but benefits from volume discounts, corporate finance rates. In most cases, employers reclaim most of the VAT. The employee pays a monthly deduction, which includes everything but electricity, petrol, or diesel, typically for 2-4 years. However, the benefit is taxable. With cars, the government vary the tax depending on how clean the car is. Put simply, the kinder you are to the environment, the kinder HMRC are to you!

Well Then, Are Electric Cars Worth the ­Salary Sacrifice?

With electric cars, there is no tax on the benefit until April. Then, a very small charge until 2025. Couple this with the low motoring cost an electric car salary sacrifice arrangement can make electric cars more cost-effective than running a 5-year-old diesel car! We know what’s in the papers, well, online; EVs have no range and can’t be charged. We know that’s just not true! It’s worth taking the time sacrifice to look at that too, we have a couple of blogs that may help. So, are electric cars worth the salary sacrifice? In short, YES!

There is only one thing better than driving a brand-new car: driving a brand-new electric car! Feel great knowing you’re not directly polluting and being subsidised for your motoring by the taxman! That’s really something to smile about, especially after this wild year.

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