What is salary sacrifice?

Electric car salary sacrifice: The employee perk that’ll have your team queuing up to thank you

Ever wondered how to keep your best people happy without breaking the bank? Enter electric car (EV) salary sacrifice – the employee benefit that costs you nothing, but could save your team thousands.

If you’re scratching your head wondering what salary sacrifice actually is, you’re not alone. 

We’ve broken down everything you need to know so you can decide if it’s right for your business.

What is EV salary sacrifice?

Salary sacrifice isn’t new.

It’s been helping employees save money for years through schemes like Cycle to Work, pension contributions and childcare vouchers.

But there’s a newcomer on the block, going by the name of electric car salary sacrifice.

Basically, your employees swap (or ‘sacrifice’) a portion of their monthly salary for a brand-new electric car (EV). Because the deal goes through your company, they get access to business-level discounts and your buying power.

The result?

They can often get a much nicer car than they’d manage on their own – sometimes saving 30%-50% compared to personal leasing.

And the best bit is that it doesn’t cost your business a penny extra.

How does salary sacrifice work?

Don’t worry – it’s simpler than it sounds.

Here’s the process:

Step one: Your employee chooses an electric car lease deal and agrees to sacrifice part of their gross salary to cover the lease cost and Benefit in Kind (BiK) tax.

Step two: They save money on National Insurance and income tax on the rest of their salary (because their salary is now ostensibly ‘less’, once the sacrificed portion has been taken away). Meanwhile, you save on Class 1 National Insurance contributions.

Step three: Your employees gets the keys to a shiny new car for less money than they’d pay going direct to a leasing company.

Step four: You sit back and watch your employee satisfaction scores climb (while your admin stays the same).

At Carparison, we handle the heavy lifting and walk you through every step of the process, so you’re never tearing your hair out trying to navigate your way through.

You focus on running your business, we’ll sort the cars.

What are the benefits of salary sacrifice?

Tax savings that actually matter

Thanks to tax changes in 2017, there’s no point salary sacrificing petrol or diesel cars anymore – the BiK tax is just too high.

But electric cars? That’s where the magic happens.

Benefit in Kind tax on electric vehicles is currently 3%, and will rise by 1-2% a year until it reaches 9% in 2029, where it will likely be fixed for a time.

Much lower than the BiK rates for petrol or diesel cars, and much kinder to your employees wallets.

Your employees will save on National Insurance and income tax, while your business saves on National Insurance and pension contributions.

Fuel savings

Charging an electric car – despite fluctuating energy prices – still works out cheaper than filling up with petrol or diesel over the vehicle’s lifetime.

Add workplace charging points and you’ve got yourself an irresistible employee perk.

The Workplace Charging Scheme (available until March 2026) can even help cover some of the upfront costs of installing EV chargers.

Hit your green goals without the headache

With the 2030 ban on new petrol and diesel cars looming, electric car salary sacrifice helps your business get ahead of the curve.

You’re not just saving your employees money – you’re future-proofing your company and boosting your green credentials. Win-win-win.

Keep your team happy

The beautiful thing about salary sacrifice is that it costs you nothing extra but goes a long way towards attracting and keeping top talent.

Plus, it’s a great way to offer car benefits to your wider team, not just senior management. No more awkward conversations about who gets a company car.

How much can employees save?

The numbers are pretty impressive.

Employees typically save between 30% and 50% compared to personal leasing.

This saving factors into the salary they sacrifice, minus the tax savings they make. For someone in the 40% tax bracket, the savings can be substantial – we’re talking thousands of pounds per year.

For example, a car that costs £500 per month to lease through a personal deal might only end up costing your employee around £300 in net pay, saving them £200 each month.

Over the course of a year, that’s £2,400 saved.*

*Price not representative of a real deal and for illustration purposes only.

Is salary sacrifice right for your business?

If you want to offer a meaningful employee benefit that doesn’t dent your budget, salary sacrifice could be perfect.

It’s particularly attractive if:

• You want to improve employee retention
• You’re working towards sustainability goals
• You’d like to offer car benefits to more than just senior staff
• You want a hassle-free setup

Getting started is easier than you think

Ready to explore salary sacrifice for your team?

We’ve made it as straightforward as possible.

All you need to do is get in touch with our expert team. We’ll handle the legwork, your team will be supported, and your employees will have access to our entire range of EV lease deals.

Putting the ease in car leasing isn’t just our mission – it’s our promise.