Salary Sacrifice remains the cheapest way to drive an EV

Salary sacrifice is a great way to make your money go further when it comes to driving a new car, especially in the case of electric vehicles (EVs). Uptake in these schemes are booming in popularity, with the British Vehicle Rental and Leasing Association’s (BVRLA) Leasing Outlook Report revealing a 96% year-on-year increase.

Despite this, many may not fully understand what a salary sacrifice scheme is, how it works, and how it saves you money.

So, with that in mind, here’s your complete guide to salary sacrifice as both an employee and an employer:

What is a salary sacrifice scheme?

A salary sacrifice scheme is a method of driving a new or used car via your employer, with your monthly contributions taken from your gross salary – in other words, before your tax and national insurance contributions are calculated. Salary Sacrifice schemes also include your road tax, insurance, MOT and maintenance costs too, so your monthly contribution covers everything.

For employers, it means you’ll be saving on your National Insurance and tax contributions on behalf of your employees, as well as fulfilling your duty of care and ensuring your staff members are driving reliable, well maintained, and fit-for-purpose cars.

For employees, you’ll be driving a fully insured and maintained car for a fixed monthly amount, meaning you don’t need to worry when your MOT or insurance renewal is due or when a tyre needs replacing.

How is salary sacrifice cheaper than buying?

The main money-saver is that your monthly contribution is made from your gross salary, so when tax and National Insurance is calculated on your net salary, that number is lower – meaning you’ll be paying less.  On top of this, your agreement also includes your insurance, road tax, MOT and maintenance, so you’ll be saving on more than the cost of the car.

Do I pay Benefit in Kind tax if I have an EV?

Yes, an EV on a salary sacrifice scheme will come with a Benefit in Kind (BIK) tax, which is currently (25/26 Tax Year) 3% of the cost of the car, taxed at your personal rate (20%, 40% or 45%).

It’s projected to rise to 9% by 2029, but that’s still a lot less than BIK for a petrol or diesel car, which is around 37%, while Mild and Full Hybrid vehicles will jump up to 21% (12% for Plug-in Hybrids).

What’s the cheapest way to drive an EV?

The cheapest way to have access to a brand-new electric car is via a salary sacrifice scheme via your employer.

Whether you’re an employer or an employee, you’ll make savings. Employees save because the car cost comes out of their gross salary, reducing both income tax and NI, while avoiding separate payments for insurance, tax, servicing and maintenance. Employers save because they pay lower employer NI contributions on the reduced gross salary.

With a Tusker salary sacrifice, we source all of our cars directly from the manufacturers, which means we can offer them to you at a discounted rate too!

On top of all of this, you’ll benefit from a lower cost-per-mile with an EV (around 6p per mile) versus a petrol or diesel car (17p per mile and rising). This is mainly down to electricity being cheaper per unit of energy than fuel, and EVs being more energy-efficient, which means you travel further on the same amount of energy.

How do employers join a salary sacrifice scheme?

If you’re an employer looking to launch a salary sacrifice scheme, get in touch with us today! At Tusker, we provide communications and support so your employees know how to join and can enjoy the benefits of driving an EV on salary sacrifice.

If you’re an employee, start by checking whether your employer already offers a scheme. If they do, all you need to do is choose your car, sign the agreement, and start driving, with the cost taken directly from your gross salary each month.

If your employer doesn’t yet have a scheme in place, you can let them know you’re interested.

Drive smarter with Tusker.