EV Salary Sacrifice Guide
Electric Vehicle (EV) Salary Sacrifice Explained
Leasing an Electric Vehicle via salary sacrifice is one of the most tax-efficient benefits in the UK. Save up to 30% – 60% on the cost of a brand new EV compared to private leasing.
How Does EV Salary Sacrifice Work?
Under an EV salary sacrifice arrangement, you formally agree to give up a portion of your monthly gross salary in exchange for a brand-new electric car (often including insurance, maintenance, breakdown cover, and tyres).
🚗 The Tax Advantage:
- Because the lease payment comes out of your pre-tax salary, you save Income Tax (20%, 40%, or 45%) and National Insurance (2% to 8%) on the lease amount.
- In exchange, the car is treated as a company car, so you pay Benefit-in-Kind (BiK) tax.
- Because the government incentivises electric cars, the BiK rate for EVs is extremely low (3% for 2025/26, 4% for 2026/27). This tiny BiK tax is dwarfed by your massive tax/NI savings!
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Note: Figures in the comparison table below are calculated based on a 40% Higher Rate taxpayer in tax year 2025/2026 (3% EV BiK rate).
Comparison: Private Lease vs EV Salary Sacrifice (£500/mo)
Example based on a £60,000 salary earner leasing an EV with a £35,000 P11D list price at £500/month gross lease cost:
Income Tax Saved (40%)
+£200.00 Saved
Private Lease
£0
Salary Sacrifice
£200.00
National Insurance Saved (2%)
+£10.00 Saved
Private Lease
£0
Salary Sacrifice
£10.00
Monthly BiK Tax Paid (3%)
-£35.00 BiK Tax
Private Lease
£0
Salary Sacrifice
£35.00
Net Monthly Cost to You
Saves £175.00 / mo
Private Lease
£500.00
Salary Sacrifice
£325.00
Annual Employee Savings
+£2,100 / year Net Gain!
Private Lease
£0
Salary Sacrifice
£2,100 / year
| Cost Component | Private Lease (Net Pay) | Salary Sacrifice (Gross Pay) | Monthly Saving |
|---|---|---|---|
| Gross Monthly Deduction | £0 | £500.00 | — |
| Income Tax Saved (40%) | £0 | £200.00 | +£200.00 Saved |
| National Insurance Saved (2%) | £0 | £10.00 | +£10.00 Saved |
| Monthly BiK Tax Paid (3% of £35k ÷ 12 × 40%) | £0 | £35.00 | -£35.00 BiK Tax |
| Net Monthly Cost to Employee | £500.00 | £325.00 | Saves £175.00 / month |
| Annual Employee Savings | £0 | £2,100 / year | +£2,100 Saved Yearly! |
Model Your EV Salary Sacrifice
Test your exact car lease cost and P11D value in our interactive tax calculator.