What is an electric car salary sacrifice scheme?

The words salary and sacrifice don’t sound like they should go together for anyone looking to improve their finances… but that’s where you’re wrong, especially if you’re looking to make the switch to an electric car.

Electric car salary sacrifice schemes are great for both employers looking to recruit and retain the best talent, as well as employees who can take advantage of the huge financial benefits.

Our guide will explain what salary sacrifice is and how it works, as well as why companies should strongly consider setting up a scheme.

What is salary sacrifice?

Salary sacrifice means trading in a portion of your pre-taxed annual salary in return for goods or services.

Employee schemes have been popular for years with companies looking to offer generous staff benefits and often include healthcare, gym membership or increased pension contributions. By using salary sacrifice, it allows employees to make savings on income tax and National Insurance Contributions (NIC).

Electric car salary sacrifice schemes are increasingly common as they allow employees to drive away in a brand new EV for a fraction of the cost of regular leasing or outright purchase.

How does electric car salary sacrifice work?

Once an employer has opted to set up a salary sacrifice scheme, like the GRIDSERVE Salary Sacrifice Scheme employees will be able to choose from a list of approved electric cars.

Your company will then lease your chosen EV from a leasing company, such as GRIDSERVE Car Leasing, through a business contract hire agreement, normally lasting between two to four years. To cover the cost of the monthly payments, your company will deduct these from your monthly salary and pay the leasing company.

Leasing an electric vehicle through a salary sacrifice scheme can be up to 40% cheaper than the amount you would pay through a personal lease. This is because the monthly lease payments are deducted from the employee’s salary at source, which means ‘before tax’, so the employee doesn’t have to pay any income tax or NIC on them.

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 GRIDSERVE offers you the choice of any electric car on sale, backed up by the GRIDSERVE Electric Highway, our nationwide EV charging infrastructure that includes the 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, facilitating charging tutorials and test drives in our demo fleets so you can experience the technology 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.

How much does a salary sacrifice lease cost?

The headline figures are that salary sacrifice can be up to 40% cheaper than leasing or buying outright.  

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

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 are the salary sacrifice benefits for employees?

For employees, electric car salary sacrifice schemes are a great perk, allowing you to get behind the wheel of the latest vehicle for a fraction of the cost.

• 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 requirement 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) and they can be driven for both personal and business use.
• No ownership: You don’t have to worry about residual values or selling a vehicle when you want to change.
• Making the switch: 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.

For more on the benefits for employees, check out our complete guide.

Learn more about the GRIDSERVE Salary Sacrifice Scheme

What are the benefits for employers?

The incentive for an employee to lease an electric car through their company is an obvious one, but electric car salary sacrifice schemes are increasingly popular with employers, too.

And what’s even better is that there is absolutely no cost to set up the scheme.

• Tax savings: As well as employee NIC being reduced, employers will make financial savings on their company contributions.
• Staff benefit: Offering a salary sacrifice scheme is a great perk and will help recruit and retain the best talent.
• Company reputation: Opting for an electric vehicle scheme will reduce your overall carbon footprint, while many customers are keen to see that the businesses they are investing in are making positive environmental changes.
• Car maintenance: Salary sacrifice reduces your “grey fleet” risk and ensures your staff are driving safe, smart and well-maintained cars. That’s both an ethical consideration and good for company morale.

For more on the benefits for employers, check out our complete guide.

Who is eligible for salary sacrifice?

Most employers will be able to set up a salary sacrifice scheme, so long as employees agree to an amendment to their contract. It’s important that employees take the time to thoroughly review and understand the electric car salary sacrifice scheme’s terms and conditions, as certain restrictions may be in place.

It’s also worth noting that any arrangement must not reduce an employee’s cash earnings below the National Minimum Wage, either.

Not all employees may be eligible for the electric car salary sacrifice scheme. 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.

Check to see if you're eleigible for the GRIDSERVE Salary Sacrifice Scheme here.

How is salary sacrifice different to a company car allowance?

A company car allowance is where a lump sum is added to your salary by your employer to put towards a car – both buying or leasing, plus running costs. You’ll be responsible for sourcing, maintaining and insuring the vehicle – think of it more like regular personal ownership.

Unlike salary sacrifice, the additional allowance is taxed at the same rate, so you won’t benefit from income tax and National Insurance contributions. However, with a company car allowance, there’s no BiK tax to pay.

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