EV Salary Sacrifice FAQs
How does EV salary sacrifice work?
Your employer leases an electric car and you give up part of your gross salary to pay for it. Because the sacrifice comes out before tax and National Insurance, you effectively save your marginal rate · 28% for a basic-rate taxpayer (20% tax + 8% NI), 42% for higher-rate (40% + 2%) · on the whole lease cost. You then pay a small Benefit in Kind tax on the car, just 4% of its list price in 2026/27, which is why EVs are uniquely suited to salary sacrifice.
What is the Benefit in Kind rate for electric cars?
For fully electric cars the BiK rate is 3% of list price in 2025/26, 4% in 2026/27 and 5% in 2027/28, rising one percentage point a year to 9% by 2029/30. Even at 5%, a £40,000 EV creates a taxable benefit of £2,000 · costing a higher-rate taxpayer just £800 a year, far less than the tax saved through the sacrifice itself.
Why are petrol cars not worth salary sacrificing?
Anti-avoidance rules (Optional Remuneration Arrangements) mean cars emitting more than 75g CO2/km are taxed on the higher of the salary sacrificed or the normal BiK value, which wipes out the tax saving. Cars at or under 75g CO2/km · all pure EVs and a few plug-in hybrids · are exempt from these rules, so the arithmetic only really works for electric cars.
Does salary sacrifice affect my pension or mortgage application?
It can. Your contractual gross salary is reduced, which may lower employer pension contributions if they are calculated on post-sacrifice pay, reduce salary-linked benefits like life cover, and slightly reduce the income a mortgage lender sees. Your pay also cannot fall below National Minimum Wage after all sacrifices. Good schemes mitigate most of these effects · always check how your employer handles pension contributions before signing.
What happens to the car if I leave my job?
The car usually goes back, and early termination fees can apply · though most schemes include protections covering redundancy, long-term sickness and parental leave. Check the early exit terms before signing; this is the main practical risk of EV salary sacrifice compared with a personal lease you control directly.
For informational purposes only · Not financial advice · 2026/27 rates: EV BiK 4%, income tax 20/40/45%, employee NI 8%/2% · Assumes the car is a pure EV (OpRA exempt) and standard tax code · Employer NI savings not shown (they benefit the employer) · Check scheme terms for early exit fees