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Electric Cars as a Salary Sacrifice benefit

8 July 2021

Car schemes have always been popular as options for salary sacrifice schemes; allowing people to choose vehicles that they may not ordinarily have been able to afford in return for a payment from their pre-tax salary.

The latest car schemes also allow participants to fulfil a moral and environmental obligation as, from the 6th April 2020, the UK Government introduced huge tax savings (30% – 60%) for people to lease an electric vehicle through company salary sacrifice schemes. This has made owning an electric vehicle even more of an attractive proposition.

Whilst the vehicles may be more environmentally responsible, the structure of the scheme is still fundamentally the same as traditional salary sacrifice schemes. In the first instance the company rents an electric car from a supplier and the employee can then rent the car in exchange for their monthly payment from their gross salary (income before tax or net salary + employees’ national insurance + income tax).

Regular maintenance of the car is usually dealt with by a third party.

Operating an electric car scheme does not just benefit your employees; as an employer you will benefit from:

  • An attractive benefit proposition for new and existing employees
  • Savings on Class 1A National Insurance contributions (NIC)
  • Achieving corporate social responsibility goals
  • A way to support employee’s commitment to ‘green’ lifestyles

Whilst employees can enjoy savings on their tax and National Insurance, fixed tax-free payments, no initial up-front costs and savings on fuel and running costs.

Here are some tips, as listed in a recent article from the website Employee Benefits, on how you can implement a company car scheme in your business:

  1. Find out what staff want – are your staff interested in electric cars and using the salary sacrifice scheme.
  2. Involve people from all areas of your business in the decision – HR, procurement, and finance.
  3. Review the local Electric Vehicle infrastructure – are there charging points easily accessible for your employees – on their journey to and from work and at your workplace

We would love to talk to you via phone, video call or face to face, depending on your preference, to answer your questions. Please contact us at [email protected] Tel: 0208 189 6100