How EV Salary Sacrifice Works For UK Businesses (2025)
EV Salary Sacrifice is the future of driving electric.
Salary sacrifice isn’t new. For years, UK employees have been able to exchange part of their pre-tax salary for benefits like childcare vouchers, workplace pensions, and cycle-to-work schemes. But in recent years, one particular option has gained traction: the electric car salary sacrifice scheme.
With record numbers of EVs now on UK roads and businesses under pressure to meet net zero and ESG commitments, these schemes have quickly become one of the most attractive employee perks. They combine financial efficiency with environmental impact — and unlike many benefits, they save both employers and employees money.
This guide explains in detail how EV salary sacrifice works, what the financial implications are, and which providers are making waves in the market. We’ll cover everything from tax savings and eligibility to step-by-step implementation, helping you decide whether it’s the right move for your organisation.
What Is an EV Salary Sacrifice Scheme?
At its core, an EV salary sacrifice scheme allows employees to drive a brand-new electric car by giving up a portion of their gross salary. The scheme works because the deduction happens before income tax and National Insurance contributions are applied.
In practice:
The employer sets up a contract with a provider such as The Electric Car Scheme, Octopus EV, Tusker, or eZoO.
Employees choose an electric vehicle that suits their needs.
The monthly lease cost (which includes extras like insurance and servicing) is deducted from the employee’s gross pay.
The employee pays less income tax and NI, while the employer also saves on NI contributions.
Most packages are all-inclusive, so there’s little surprise budgeting: insurance, breakdown cover, road tax, and servicing are normally wrapped in. The employee just pays for charging.
Why Electric Cars?
Salary sacrifice has existed for years, but electric vehicles are uniquely suited to it for two main reasons:
Tax Efficiency – EVs attract extremely low Benefit-in-Kind (BIK) tax rates compared to petrol or diesel cars.
In 2025, the BIK rate for EVs is just 3%, rising only marginally to 4% in 2026.
Compare this with petrol/diesel cars, where BIK can be as high as 37%.
Policy Backing – Government climate strategy means EV incentives are protected and promoted. This creates stability for employees considering long-term commitments.
Employer ESG Goals – Offering EVs demonstrates tangible sustainability action, supporting net-zero reporting.
How EV Salary Sacrifice Works (Step by Step)
For employees, the process feels straightforward. But under the surface, there’s a structured sequence that employers must follow:
Step 1: Employer Sets Up a Scheme
Partner with a provider (e.g. The Electric Car Scheme, Octopus EV, Pink Salary Exchange). They’ll manage compliance, contracts, and onboarding.
Step 2: Employee Chooses a Vehicle
Most providers offer access to all major manufacturers — Tesla, Kia, Hyundai, BMW, Volkswagen, and more. Providers like eZoO specialise in flexible EV-only subscriptions, while others, such as Tusker, operate at scale with established fleet contracts.
Step 3: Salary Adjustment
The employee agrees to sacrifice part of their gross salary equal to the cost of the car package.
Step 4: Package Benefits
The best lease deals will include:
Fully comprehensive insurance
Maintenance and servicing
Breakdown cover
Tyres and windscreen cover
Road tax
Some also integrate home and workplace charging solutions. For example, The Electric Car Scheme runs The Charge Scheme, enabling employees to spread the cost of chargers through salary sacrifice too.
Step 5: Ongoing Management
Employers run payroll as usual; the provider handles the vehicle lease. Employers also benefit from reporting tools that make it easier to measure emissions reductions. The Electric Car Scheme, for example, provides ESG reporting dashboards.
Step 6: End of Term
At the end of a lease, employees can return the car, upgrade, or extend. Some schemes offer early exit protection for cases like resignation, illness, or redundancy.
The Financial Benefits
For Employees
Savings of 30–60% vs personal lease (depending on salary bracket and car choice).
No deposit required — unlike standard leases.
All-inclusive monthly payment avoids separate insurance and servicing costs.
Example 1: Tesla Model 3
Personal lease: ~£650/month (inc. insurance & maintenance)
Via salary sacrifice: ~£420/month
Annual saving: ~£2,760
Example 2: Nissan Leaf
Personal lease: ~£380/month
Via salary sacrifice: ~£250/month
Annual saving: ~£1,560
For Employers
Lower National Insurance contributions — since employee gross pay is reduced.
ESG credibility — support net-zero reporting.
Talent retention — EVs are a “sticky” benefit that makes employees think twice before leaving.
Who Are the Main Providers?
The UK now has a diverse EV salary sacrifice market. Each provider has strengths:
The Electric Car Scheme – Independent, wide access to all models, strong employer protection, charging integration.
Octopus EV – Bundled energy and charging options, strong green branding.
Tusker – Established fleet provider, widely used by large organisations.
Pink Salary Exchange – Popular with SMEs for straightforward onboarding.
eZoO – Innovative EV-only subscription model, short-term flexibility.
Implementation for Employers
Rolling out an EV salary sacrifice scheme involves:
Choosing a provider – Consider costs, vehicle choice, charging, and risk management.
Communicating to staff – Employees must understand savings clearly. Many
providers offer online calculators for transparency.
Payroll integration – Ensure deductions work with existing HR/payroll software.
Monitoring uptake – Track employee sign-ups and savings.
Reporting – Integrate into sustainability reports and annual benefit reviews.
Future Outlook
With the 2035 petrol/diesel phase-out approaching, EV salary sacrifice will only become more mainstream. Expect to see:
More SME adoption – as providers make onboarding simpler.
Integrated charging solutions – like The Electric Car Scheme’s Charge Scheme.
Gradual BIK increases – reducing but not eliminating savings.
Employer ESG pressure – increasing demand for measurable schemes.
1FAQs
Q: Can all employees take part?
Yes, provided salary doesn’t fall below minimum wage after sacrifice.
Q: What happens if an employee leaves?
Depends on provider. Some, like The Electric Car Scheme, include termination protection.
Q: Do schemes cover home charging?
Sometimes — depends on provider. ECS and Octopus offer integrated solutions.
Q: Will it affect my pension?
No, as long as contributions are calculated on pre-sacrifice salary.
Q: How long are contracts?
Typically 2–4 years, with the option to upgrade or return at term-end.
Conclusion
An electric car salary sacrifice scheme is one of the most cost-effective ways for UK businesses to offer a meaningful perk. Employees save thousands on driving costs, employers reduce NI contributions, and both sides contribute to sustainability goals.
With providers ranging from large fleet operators like Tusker to innovative independents like The Electric Car Scheme, there’s no shortage of choice. The best provider for your organisation will depend on size, budget, and ESG ambitions — but what’s clear is that EV salary sacrifice is here to stay.
