Electric car salary sacrifice

Written by: Simon Pavey, Last updated:26th May 2023

Electric car salary sacrifice for fleet

The cost-of-living pinch is being felt in personal and business life by all, and fleets are no exception. With the cost of second-hand vehicles and vehicle leasing on the rise, companies looking to introduce more electric vehicles into their fleets need to consider their options in order to build an electric fleet in the most cost effective manner.

In this blog we’ll break down what salary sacrifice is and how fleets can use it to electrify their fleet in a way that benefits the company’s and employee’s wallets alike.

What is a salary sacrifice car scheme?

Salary sacrifice is an arrangement between employer and employee to reduce the employee’s entitlement to cash pay in return for a non-cash benefit, such as an electric car. The cost of the car is then deducted from the employee’s salary each month before they are taxed.

A salary sacrifice car of any kind will usually be supplied by a partnered supplier and will often come in a package deal meaning that salary sacrifice EV packages may also provide users with charging infrastructure and other benefits.

2017 tax changes

In April of 2017, changes were made to tax rules that mean employees need to pay income tax on either the amount of salary sacrificed or the value of the car. Whilst this does mean that the salary sacrifice schemes aren’t quite as beneficial as they once were, they still offer a host of valuable benefits, particularly for companies/employees looking to reduce environmental impact with electric vehicles.

Is EV salary sacrifice worth it?

Whilst the tax savings may not be as significant as they were in previous years, salary sacrifice schemes still offer great perks for both companies and their employees, and is a scheme that could be well worth utilising for the following reasons:

1. All-inclusive packages

Generally, electric cars and other vehicles are on average still somewhat more expensive than combustion engine vehicles, particularly when you account for the infrastructure needed to run them. Many salary sacrifice car schemes offer all-inclusive packages that will provide employees not just with the electric car but also with a home charging point and installation as well as other benefits such as servicing maintenance discounts.

These perks quickly add up, and those opting for a salary sacrifice fleet vehicle will find themselves saving money not just on the vehicle but on all the important extras that go with it.

2. Better electric cars for a lower price

Salary sacrifice schemes for electric vehicles offer fleet drivers a more affordable price for newer electric vehicles. This is because companies with agreed partnerships to salary sacrifice car providers will get better deals on newer cars than if the employee looks to lease an EV independently.

3. No deposit

Putting down a deposit on a new vehicle can often be pricey and off putting, but with salary sacrifice schemes, there is usually no deposit for the employee to pay. This makes the acquisition easier on employees’ pockets.

4. OZEV tax advantages

The Office for Zero Emission Vehicles are a government office supporting the UK in increasing the uptake of electric and hybrid vehicles as well as implementing EV infrastructure. Electric company car drivers benefit from a lower BiK rate than combustion engine drivers, so whilst there is less of a tax break than before 2017, using salary sacrifice to acquire EVs still offers a lower tax rate.

OZEV also have other schemes in place like the Workplace Charging Scheme which can help businesses to introduce EV charging infrastructure to business sites.

How promoting a salary sacrifice scheme can help your business

Salary sacrifice schemes do offer the most saving potential for employees but there are also benefits for employers too – from money saving to improving employee retention.

Reducing National Insurance contributions

Salary sacrifice schemes knock down the National Insurance contributions for both employer and employee. Whilst there isn’t as large a tax saving as there was in years gone by, there is still a monetary saving to be made here.

Better cash flow

The uptake of salary sacrifice schemes can have a positive knock-on effect on cash flow for businesses. These schemes are typically deducted from pay before taxes, which offers a better cash flow for employers.

Employee retention and satisfaction

Opportunities for staff like salary sacrifice schemes are great for employee retention as they diversify the compensation to employees, and this range of benefits can improve retention by rewarding commitment to the company.

Increase sustainability

When it comes to increasing the number of electric vehicles on the roads, sustainability is the key thing in mind. Electric vehicles serve to reduce a company’s carbon footprint, and for companies with active fleets, the saving can be significant when the switch is made.

Reducing costs with Fuel Card Services

Whether your EV fleet is growing with a salary sacrifice scheme or you are using other means to expand your electric vehicle tally, keep cutting costs with electric charge cards from Fuel Card Services. Our range is growing, and with so many benefits to reap, and thousand of locations to use them at, these charge cards are a great opportunity to save money and time on admin costs.

Use our quick enquiry form to get in touch and we’ll help you to find an EV charge card or fuel card that fits your fleet’s needs.

For assistance with all things EV, take a look at our EV solutions.