If you’re one of the 70% of drivers who would love their next car to be electric but you’re worried about price, we’ve got a nice surprise for you. Because salary sacrifice schemes provide a far more affordable way to get behind the wheel of a brand new electric or hybrid car.
At Tusker, our salary sacrifice schemes are driving the uptake of more ultra-low emission vehicles (ULEVs). In fact, in Q1 2020, 68% of our orders were for electric or hybrid cars with our top five most-ordered cars all electric. Compared to 2019, when only one electric car made it into our top ten most popular vehicles, you’ll see that this is a major change. But why are our salary sacrifice drivers plugging into electric and hybrid cars?
Cleaner cars offer low-cost driving
EV and hybrid drivers will tell you that making the switch from expensive petrol or diesel to cheaper electricity saves them oodles of cash. In addition, greener cars also eliminate the costs associated with clean air and congestion zones. And, in some areas, ULEVs can also get free parking.
All these savings add up to significant reductions in comparison to driving a petrol or diesel equivalent. But this is just the tip of an enormous cost-saving iceberg. Because it’s not only day-to-day driving costs that reduce with ULEVs but the vehicles themselves. And that all down to a major change in the tax treatment of electric and hybrid vehicles by HMRC.
Historically, electric and hybrid cars were much more expensive than their fossil-fuelled cousins largely due to the costs associated with battery production. However, in recent years, although prices have come down, up-front price remained a stumbling block for many drivers.
But then HMRC decided to throw the full weight of the UK’s tax regime behind the transition to a net zero UK economy by incentivising drivers to take up electric and hybrid cars with enormous tax breaks.
How salary sacrifice makes ULEVs affordable
These tax changes spell good news for employees with access to salary sacrifice car benefit schemes. In the current 2020-2021 tax year, electric car drivers don’t have to pay any benefit-in-kind (BIK) - a tax levied on employee benefits - for pure battery electric cars. That’s a saving of 32% for basic rate taxpayers, 42% for higher rate and 45% for top-rate taxpayers. In the following two tax years, the BIK rate will only increase to 1% and 2% respectively.
For ultra-low emission hybrids, the amount of tax and national insurance you’ll save will depend on the emissions of the car you choose to drive. The lower the emissions and the longer the car’s electric-only range, the less tax you’ll have to pay. This means ULEVs attract much lower BIK rates than their petrol and diesel counterparts.
It’s this potential for enormous tax savings, plus the low-cost day-to-day driving offered by these cars, that has galvanised drivers to embrace electromobility. And salary sacrifice brings other benefits too.
No deposit and no hidden costs
Buy a brand new electric or hybrid car outright and you’ll need tens of thousands saved and ready to go or a decent deposit and a loan. Alternatively, you could take out another form of finance - like PCP or PCH - which only cover the cost of the car leaving you with additional bills for items like insurance.
With salary sacrifice everything’s different:
- No need for a deposit - your first deduction is taken directly from your salary and you’ll know exactly how much this will be for every single month of your agreement. We don’t ask for credit checks either.
- Regular monthly amounts - the same amount is taken monthly, directly from your pay before it hits your bank account, so you won't have to worry about an un-budgeted expense.
- The monthly amount includes everything you need - from insurance, road tax and breakdown cover to routine servicing, MOTs, maintenance and more, your monthly deductions provide a comprehensive motoring package.
- Major tax and national insurance contributions - during the 2020-2021 tax year, you’ll save your entire tax and NI contributions on the monthly amount for an electric car.
- A shiny new car every few years - at the end of the agreement, you can either hand the car back, purchase it, or take out an entirely new car - your old car is picked up and you get a brand new car to replace it with a fresh battery and all the latest tech, infotainment and safety features you could want.
- You’re protected from lifestyle changes - if you leave your job, get made redundant or go on long-term leave, there are protections in place to cover most circumstances (we advise you check your scheme policy for full details on what is covered).
That sounds good, but what does all this mean in pounds and pence? On average, Tusker drivers could save an average of £320 per month in income tax, Benefit in Kind and National Insurance.
All these ULEV savings add up to a very attractive and cost-effective package that removes the up-front vehicle cost hurdle for increasing numbers of drivers. If you’re ready to join the ultra-low emission driving revolution, compare cars and create your no obligation quote today.