If you’ve been considering converting to an electric vehicle, you may have looked into salary sacrifice schemes. But what exactly are they? In this blog, we’ll be taking a look at the benefits of these schemes, how to apply and if they’re better than purchasing outright.

What Is a Salary Sacrifice Scheme?

Salary sacrifice schemes are an agreement between an employer and an employee involving a change to their employment contract. Salary sacrifice schemes allow employees access to non-cash benefits such as a company car, childcare vouchers or pension contributions in exchange for a small fraction of their pre-tax gross salary.

In turn, this helps the employee save on income tax payments and national insurance contributions.

salary sacrifice scheme

Find Out if You're Eligible for our Salary Sacrifice Scheme!

For more information or to talk through the scheme with one of our engagement team fill out the ‘Download A FREE Electric Car Scheme Guide’ form below and select request a call or give us a call on 0300 302 0626 and we’ll be happy to help.

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.

tesla model y hatchback - Fleet Evolution, Tamworth

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, 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.

You will also have to be over 21 and still earn more than the national minimum wage post deductions. Please note you can only opt-in for a salary sacrifice scheme if employed. Unfortunately, this electric car scheme is not available for self-employed individuals.

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!

Fleet evolution

How Does An Electric Car Salary Sacrifice Scheme Benefit Employers?

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.

In the UK, the minimum amount you can salary sacrifice is £5,824 per year (2020/21 tax year), and the maximum is £40,000 per year; 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. This allows you to receive up to 45% tax relief on contributions to your pension pot, making it an even more attractive way to save for retirement. For more information, visit our blog on ‘Do I Pay Tax On Salary Sacrifice Cars?’.

Benefits Of Salary Sacrifice For Employers

Salary sacrifice schemes also have many benefits for employers, as it helps to attract and retain top talent. By offering an EV salary sacrifice scheme, employers can show that they are also committed to supporting employees with cost-effective, environmentally friendly vehicles.

It also helps reduce the environmental impact of their business operations, and the company will save on their taxable income.

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 get people to join the electric revolution; that’s why we offer every car available on the UK EV market! For more information, please take a look at our estimated lead times and 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 definitely worth considering, as it could be a great way to get behind the wheel of an EV without paying out of pocket!

Cars availiable for salary sacrifice
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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.