Electric car salary sacrifice: An employee’s guide

Salary sacrifice schemes are incentives set up by companies to recruit and retain employees.

They work by asking staff to trade in a portion of their pre-tax salary in return for products and services. This can include gym memberships, childcare, healthcare or company cars.

They’re great for staff because as the sacrificed amount comes off pre-tax earnings, you see a significant saving on both the product or service compared to buying it yourself, as well as reducing your overall income tax and National Insurance Contributions (NIC).

Check out our complete guide for a full rundown of how salary sacrifice schemes work.

And if you’re an employer, then find out how an electric car salary sacrifice scheme can benefit your business.

How does it work?

If your employer has a scheme in place then you simply opt in, pick a car, agree the terms and wait for your car delivery.

The payments will automatically be deducted from your gross monthly salary by your company and paid to the scheme provider, such as GRIDSERVE Car Leasing.

What are the benefits of electric car salary sacrifice schemes for employees?

So, is a salary sacrifice worth it? In short, yes. They’re great for employees as it means you can access useful products and services for a fraction of the cost of paying for it yourself.

• Income tax and NIC: Costs will be deducted from your pre-taxed salary meaning your taxable income is reduced.
• All-inclusive packages: Road tax and maintenance – and sometimes insurance and charging - can all be included in your monthly payments. Plus, you’ll be saving on not having to pay for petrol and diesel if you switch to an EV.
• No upfront costs: There’s no large deposit or down payment required before you start driving.
• No credit check: As the lease is managed as a business lease through your company, there’s no impact on your credit rating with salary sacrifice.
• Fixed monthly payment: Costs are fixed for the duration of the lease so you can easily budget.
• Vehicle choice: There’s plenty of options available, plus you can upgrade every two, three or four years (depending on contract length). They can be driven for personal and business use, too.
• No ownership: You don’t have to worry about residual values or selling a vehicle when you want to change.
• Making the switch easy: Electric cars are expensive to buy outright but through a salary sacrifice scheme you can afford to make the switch at a fraction of the cost. Home charger installation is often included too.

Learn more about the GRIDSERVE Salary Sacrifice Scheme

How much does it cost?

The question shouldn’t be how much does it cost, but how much can it save? Figures show that electric car salary sacrifice schemes can be up to 40% cheaper than buying or leasing outright.

For example, a monthly leasing payment might be upwards of £500 for a Tesla Model 3 but through a salary sacrifice scheme, the cost to you will be closer to £300 as you’ll see a reduction in your income tax and National Insurance contributions on your monthly payslip.

Remember, you will still have to pay a small amount of Benefit-in-Kind (BiK) tax (also known as company car tax) but for electric cars this is extremely low compared to petrol and diesel equivalents.

Indicative example based on a total monthly lease cost of £525.96.

What vehicles can I lease on an electric car salary sacrifice scheme?

The choice of vehicles depends on the scheme that your employer has signed up to. Theoretically, there’s no limit on what you can opt for in the same way you might be restricted by company car bands.

Am I eligible for a salary sacrifice scheme?

Obviously, you need to check your company offers a salary sacrifice scheme as there’s no obligation for them to do so (although there are plenty of incentives for them to). Check out our guide if you want to help convince your boss or HR department to take the next step.

If your company does introduce a scheme, then make sure you take the time to thoroughly review and understand the terms and conditions, as certain restrictions may be in place.

Importantly, the arrangement cannot reduce your cash earnings below the National Minimum Wage. This may affect those who have variable pay and may see less salary in certain months. Speak to your employer and finance department about how you can work out payments and if salary sacrifice is still right for you.

Not all employees will be eligible for the electric car salary sacrifice scheme, either. For example, most companies will expect the employee to be employed on a full-time basis and in possession of a valid driver’s licence, as a minimum.

It’s also worth remembering that pension deductions will be reduced in line with your lower salary. Consider all your financial circumstances before opting in.

What happens to the car if I leave my job?

In most cases, if you leave employment, you’ll need to return your car and likely pay an early termination fee, which will be deducted from your final pay packet. The amount will be based on the cost of the lease and remaining time left on the contract. You’ll also have to pay for any damage or excess mileage fees, just like with a personal lease.

In rare scenarios, you may find your new employer will be willing to transfer the lease into their name and operate the salary scheme for you.

What happens to the car if I go on maternity or paternity leave?

You’ll be able to continue using the vehicle with the employer and funder covering the costs if your pay falls to statutory minimum amounts. Financial assistance is not mandatory though so check with your employer about any repayments that will be required when you return to work.

What happens at the end of the term?

It’s straightforward. You simply return the car as you would with any personal lease and settle any excess mileage or damage fees. If you want to start a new lease, then start these conversations early so you can try and time the delivery of your new vehicle for when the outgoing car is collected.

Why choose the GRIDSERVE Electric Vehicle Salary Sacrifice Scheme?

There’s plenty of reasons to choose the GRIDSERVE Salary Sacrifice Scheme, not least the fact that we offer you the choice of any electric car in the market backed up by our industry-leading EV charging infrastructure – and that includes our award-winning Electric Forecourts® with EV Gurus on hand to provide expert advice.

We’ll also provide roadshows across the UK to support employees in making the switch, with expert advice and demo fleets ready for prospective employees to test drive before signing up.

Our scheme offers the following in a single deduction from your monthly salary:

• Monthly lease price
• Fully comprehensive insurance for you and additional drivers
• All annual services, including replacements – e.g. wiper blades and brake pads
• All planned replacement tyres
• Annual breakdown cover
• Three months free charging on the GRIDSERVE Electric Highway

Home wallbox installation is offered as an add-on. The cost will be spread over the contract length with the instalment added to the one single deduction.

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