How electric car salary sacrifice works
The employer leases an electric vehicle and provides it to the employee as a company car. The employee agrees to a reduction in gross salary in return for the vehicle and pays company car Benefit-in-Kind tax.
Because the salary reduction is made before Income Tax and National Insurance are calculated, savings may be available to both the employee and employer. The actual amount depends on factors including the employee’s salary and tax position, the selected vehicle, annual mileage and the terms of the scheme.
One important distinction is that the lease remains the employer’s responsibility. A salary sacrifice vehicle is still a company car, even though the employee funds it through a reduction in salary.
That’s why the scheme needs to be structured carefully, administered properly and supported by a suitable policy.
Could an electric car salary sacrifice scheme work for you?
The salary sacrifice scheme is available to eligible employers operating PAYE and is designed for electric cars.
For an employee to participate, the salary deduction must not reduce their cash earnings below the applicable National Minimum Wage. Existing salary sacrifice arrangements, such as pension contributions, also need to be taken into account.
Salary sacrifice is unsuitable for self-employed people or directors taking a relatively low salary. Individual eligibility, tax implications and employment terms should always be checked before an agreement is made.
Could salary sacrifice work for your employees?
You don’t need a large workforce or an existing company car scheme to start the conversation.
Tell us about your business, your employees and what you’d like the scheme to achieve. We’ll help you establish whether an electric car salary sacrifice scheme is viable and explain what would happen next.




