What is salary sacrifice for electric cars?▾
Salary sacrifice is an arrangement where you give up part of your gross salary in exchange for your employer providing you with a brand new electric car. Because the sacrifice comes from gross pay, you save income tax and National Insurance on the amount sacrificed. The car is a benefit in kind (BIK) but the BIK rate for electric cars is just 4% in 2026/27.
How much can I save with a salary sacrifice EV scheme?▾
Savings depend on your salary, your tax band and the car you choose. A 40% taxpayer earning £60,000 and sacrificing £500 a month saves about £200 a month in income tax and £10 a month in National Insurance, while paying about £53 a month in BIK tax on a £40,000 EV. That is a net cost of £343 a month for a car that normally comes fully insured, taxed and maintained. The NI saving is modest in that example because the sacrifice comes out of earnings above the £50,270 upper earnings limit, where employee NI is only 2%; sacrifice taken from earnings below that limit saves 8% instead.
What is the BIK rate for electric cars in 2026/27?▾
The Benefit in Kind rate for zero-emission electric vehicles is 4% of the list price for 2026/27. It is legislated to rise by one percentage point a year: 3% in 2025/26, 4% in 2026/27, 5% in 2027/28. For comparison, a typical petrol car sits at 30% or more, up to a maximum of 37%. This extremely low rate is what makes EV salary sacrifice so tax-efficient.
What is included in a salary sacrifice EV scheme?▾
Most schemes include: the car lease, comprehensive insurance, maintenance and servicing, breakdown cover, road tax (VED), and tyre replacement. Some also include a home charger installation. The only additional cost is electricity for charging. This all-inclusive nature means the monthly sacrifice is the total cost of motoring.
Can I choose any electric car?▾
The choice depends on your employer's scheme. Most schemes offer a wide range of EVs from Tesla Model 3 and Model Y, VW ID.3 and ID.4, BMW iX1, Hyundai Ioniq 5, MG4, and many more. The employer may set a maximum list price. Popular choices range from £25,000 to £50,000 list price.
What happens if I leave my job during the lease?▾
If you leave, you typically have three options: return the car (an early termination fee may apply), transfer the lease to your new employer if they have a scheme, or take over the lease personally (converting to a private lease). The early termination cost varies but is usually 3-6 months of payments.
Does salary sacrifice affect my mortgage application?▾
Salary sacrifice reduces your gross salary on paper, which could affect mortgage affordability calculations. However, most lenders now understand salary sacrifice arrangements. Some lenders use the pre-sacrifice salary. Inform your mortgage broker about the arrangement. It is worth checking with your intended lender before committing.
Is salary sacrifice better than buying an EV outright?▾
For most employees, salary sacrifice is cheaper than buying or leasing privately. The tax and NI savings, combined with the all-inclusive package, make it hard to beat. However, if you are a basic rate taxpayer with a short commute, the savings are smaller. Compare the net cost after tax savings with quotes for PCP, HP or outright purchase.
How much does it cost to charge an electric car at home?▾
Home charging on a standard tariff costs approximately 7-8p per mile (assuming 4 miles per kWh at 28-32p/kWh). An EV doing 10,000 miles per year costs about £700-£800 in electricity. With an EV tariff (overnight charging at 7-10p/kWh), this drops to £175-£250/year. Compare this to £1,500-£2,500/year in petrol.
What is the CO2 saving from switching to an electric car?▾
The average UK petrol car emits approximately 2.3 tonnes of CO2 per year (10,000 miles at 230g/km). An EV on the UK grid emits approximately 0.5 tonnes (accounting for electricity generation). That is a saving of about 1.8 tonnes of CO2 per year. Over a 3-year lease, that is 5.4 tonnes, equivalent to approximately 2 return flights to New York.