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Electric Vehicle Motoring through the Salary Sacrifice Scheme

Drivers could find themselves better off with the government’s salary sacrifice scheme

Drivers could find themselves better off in the new financial year by taking on an electric car under the government’s salary sacrifice scheme.

As many as seven out of ten drivers were aware of the Government’s Cycle to Work scheme, which allows a staff member to purchase a new bicycle from their salary before income tax and National Insurance payments have been made. However, fewer than 10% were aware of a similar programme for cars, and that programme heavily favours electric vehicles.

The legislation has been around since 2016, ensuring that ultra-low emission vehicles (ULEVs) were made as affordable as possible. With electric cars being as low emission as possible, the benefits to swapping some salary in return for a car are significant. Now renamed to Optional Remuneration Arrangements, the tax benefits have mostly been removed for petrol and diesel-powered cars, but remain in place for ULEVs.

Electric Vehicle Ownership through the Salary Sacrifice Scheme Image

Take a 24hr test drive in a BMW i3

As well as saving on income tax and NI, buyers can also benefit from the government’s OLEV grant and zero-rated Benefit in Kind taxation from April 2020. The net result is that a motorist could save as much as £300 per month by opting to go green. With insurance, breakdown cover and maintenance often included in the salary sacrifice schemes, the savings could be even greater throughout the lease of a new vehicle.

Electric Vehicle Ownership through the Salary Sacrifice Scheme Image

Take a test drive in an Audi e-tron

As an example, leasing company Tusker can provide an Audi e-tron for £510, with tax savings of £369 per month. Savings on fuel can be added to that, as electric power still costs significantly less than fuels from a regular filling station.

“Salary sacrifice is nothing new but appears to be still an unknown to a lot of working people,” explains Paul Gilshan, chief executive officer at Tusker. “It’s the solution to drive a new electric vehicle for both 20% and 40% taxpayers, but it seems the myth is that people think they can’t drive an EV unless they are on high salaries.

“Put simply, salary sacrifice is key to making battery electric vehicles affordable for the average British motorist and key to the UK significantly reducing emissions of transport.”

Electric Vehicle Ownership through the Salary Sacrifice Scheme Image

Take a test drive in a Nissan Leaf

What are the benefits for an employee?

The government scheme allows an employee to drive an EV company car in exchange for a portion of their gross salary. That is, before income tax and National Insurance have been taken off, resulting in a significant tax saving. Additionally, there are further savings on company car tax to be made, as well as lower fuel costs.

How does the employer benefit?

Apart from being able to offer staff a new car at a reduced cost, the company may also benefit from reduced National Insurance contributions. The government schemes are also VAT and HMRC compliant.

Electric Vehicle Ownership through the Salary Sacrifice Scheme Image

Take a test drive in a Renault Zoe

Who is eligible?

That comes down to company policy, although it’s only open to permanent employees. If your company doesn’t offer a salary sacrifice option, speak to your HR team.

How do I get a car through the scheme?

Your employer will have a contract with a leasing company and should be able to provide you with a step by step process. Your HR team will the best starting point, assuming there’s no readily available information without your company handbook or intranet service.

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