How To Choose The Right Electric Car Salary Sacrifice Scheme
Thinking about implementing or joining an electric car salary sacrifice scheme? You're not alone. With the UK's push towards electric vehicles and attractive tax benefits, these schemes are becoming increasingly popular for both businesses and employees. Let's break down everything you need to know about choosing the right electric car salary sacrifice scheme, whether you're an employer looking to set up a scheme or an employee considering taking part.
For Employers: Setting Up Your EV Salary Sacrifice Scheme
Getting an electric car salary sacrifice scheme right from the start can make all the difference. As an employer, you want to implement a benefit that works smoothly for both your business and your employees.
Making The Business Case
Setting up a salary sacrifice scheme isn't just about ticking the green initiative box – it's a powerful tool for employee retention and satisfaction. With current Benefit-in-Kind rates for electric vehicles remaining incredibly low, you can offer your employees significant savings while demonstrating your commitment to sustainability.
Understanding The Financial Implications
When it comes to costs, transparency is key. The most successful schemes typically offer all-inclusive pricing models, where everything from insurance to maintenance is wrapped into one neat monthly payment. However, it's crucial to understand all potential costs upfront:
Early termination costs (because life happens, and employees might need to leave the scheme),
Insurance excess levels and what they mean for your business,
End-of-contract damage charges and how they're assessed,
Excess mileage charges and how they're calculated,
Any hidden fees that may arise
A good tip is to look for providers offering price matching or guarantee policies, this can help you ensure you're getting the best value for your business.
Getting The Insurance Right
Insurance might not be the most exciting topic, but it's crucial to get it right. A good scheme should include:
Comprehensive coverage for all vehicles,
GAP insurance (because no one wants to be caught short if something goes wrong),
European travel coverage (perfect for those business trips abroad),
Solid breakdown coverage,
A clear accident management process,
Replacement vehicle provision.
For Employees: Making Your Decision
You’ve been offered the chance to join your company's salary sacrifice scheme, exciting times! But before you start dreaming about that shiny new electric car, let's look at what you need to consider.
Understanding The Savings
One of the main perks of salary sacrifice schemes is the potential tax savings. By reducing your gross salary in exchange for the car, you'll pay less income tax and National Insurance. With current UK tax benefits for electric vehicles, the savings can be substantial – often making it cheaper than a personal lease.
The table below is a great example of how much you can save as an employee who has access to The Electric Car Scheme. We have taken one of our most popular cars of 2024, the MG4 to show you how much you could save through salary sacrifice.
| MG4 150kW SE EV Long Range 64kWh | Cost Breakdown Monthly |
|---|---|
| Average Monthly Salary Sacrifice (inc VAT) | £402 |
| Employee Income Tax Savings | -£161 |
| Employee National Insurance Savings | -£8 |
| Average Benefit-In-Kind Tax Over Term | £37 |
| Net Cost/You Pay | £271 |
In this example, we have used a 40% tax payer, who is happy to travel 10,000 miles per annum and wants to lease the vehicle for 3 years - you can input all of these details onto our quote tool and get a personalised quote suited to you!
In this example, without salary sacrifice, the employee would pay £402 per month for the MG4. With a salary sacrifice scheme, they will save £161 on Income Tax and £8 on National Insurance, meaning they’ll only pay £271 per month for the lease. The employee will have to pay a small amount of BiK, but only £37 per month.
Choosing Your Perfect Electric Car
This is the fun part! However, it is also important to remember that salary sacrifice schemes will have a set of cars available to choose from, so depending on the provider your employer chooses, you may find it to be a tad limiting. Beyond picking your favourite colour, you need to consider the following:
Real-world range (those manufacturer figures can be optimistic),
Your daily commute and regular journeys,
Family needs (if you need to fit three child seats, some models might be ruled out),
Charging options at home and work (some salary sacrifice schemes have added offers to help with this, so be sure to keep an eye out for those!)
The Practical Bits
Modern schemes have made everything much easier with digital platforms and mobile apps. You can usually:
Get instant quotes online - our quote tool is a great example of this!
Book test drives,
Track your vehicle's delivery,
Manage your account through an app,
Access support when you need it.
The Financial Fine Print
While salary sacrifice schemes often offer great value, make sure you understand:
Exactly how much your monthly salary be reduced by,
Insurance excess levels,
What happens if you need to leave the scheme early,
End-of-contract charges,
Mileage limits and charges.
Making it Work Day-to-Day
Living with an electric car is different from a petrol or diesel vehicle. Consider:
Where you'll charge regularly,
Whether you need a home charger installed (there are still some Government grants available to make this easier),
Your local public charging network,
Journey planning for longer trips - you can use specific EV charging apps for this, which makes the experience way more seamless.
Remember, a good scheme provider should offer plenty of support and educational resources to help you make the switch to electric with confidence! Especially as this may be your first electric car, so you may be experiencing range and charging anxiety.
Making Your Final Decision
Whether you're an employer or employee, taking time to understand all aspects of a salary sacrifice scheme will help ensure it works for everyone involved. The UK's push towards electric vehicles makes this an excellent time to consider these schemes, with tax benefits and infrastructure improving all the time.
Employers’ main focus should be to find a provider who offers transparency, comprehensive coverage, and excellent support. For employees, make sure you understand both the benefits and commitments involved and choose a vehicle that truly suits your lifestyle.
When deciding on the right electric car salary sacrifice scheme, it is important to consider the range of eligible vehicles, potential tax savings, maintenance and running costs, charging infrastructure and the length of the agreement. By keeping these factors in mind, both employees and employers can make an informed decision and enjoy the benefits of driving an electric car.
Last updated: 15.01.25
