- With the low Benefit-in-kind of electric vehicles, they are the perfect option to make the most of the UK’s EV salary sacrifice schemes.
- Depending on your salary bracket, the equivalent saving of having access to a brand new EV on such a scheme, compared to leasing the same vehicle, alongside insurance, maintenance, and breakdown cover, can be as high as 60%. Savings can be even higher if you opt for a used EV on salary sacrifice, with many models offering incredible value for money, even before the tax savings enabled by the scheme.
- We spoke with Lash Saranna, the Co-Founder and CEO of premium electric car salary sacrifice firm, EZOO, to discover more about the ins and outs of EV salary sacrifice.
How and why does salary sacrifice work?
Put simply, salary sacrifice is a method in which an employee agrees to forgo a set proportion of their salary, in favour of a non-cash benefit. This can be a whole range of benefits, not just specifically EVs, but with the EV transition well underway, it’s becoming an ever more popular non-cash benefit option.
With increasing income tax rates, as employees move higher up the salary ladder, a salary sacrifice EV makes particular sense for employees who are at or close to key salary bands of £35,000, £50,000, £75,000, and £125,000. These specific salaries are the most cost effective points to undertake an EV salary sacrifice contract, allowing an employee’s payslip to come in below a higher tax bracket.
Lash added:
“Signing up for the EZOO salary sacrifice scheme is a very simple process, as we implement the scheme on the employer’s behalf. The employee has a contract with their own employer, and simply chooses the car, while we process the order, deliver it to their door, and take monthly car payments directly from their salary, before tax and national insurance.”
What’s included?
Packages will vary slightly between EV salary sacrifice providers, and with many salary sacrifice providers, car insurance is an optional, extra cost. In EZOO’s case, comprehensive insurance, alongside replacement tyres and breakdown cover, are all included in the total monthly cost.
In the near future, road tax will need to be covered from the employee side under salary sacrifice schemes, however. From April 2025, all new EVs will be required to pay annual vehicle excise duty – with EVs worth over £40,000 set to pay an additional £410 ‘luxury car tax’ for five years, from new.
Salary sacrifice deals
While the saving from new is dependent on a couple of factors, such as the length of the salary sacrifice contract, and the employee salary, here are a couple of examples of EZOO-specific offers, to give you an indication of the kind of savings you can expect.
On an annual salary of £125,000, for instance, a new Porsche Macan Electric can be picked up on a 48 month contract, with 5,000 allocated annual miles, for £599 a month, which is deducted from each paycheck. This represents an equivalent saving of 59%, compared to buying the EV outright.
Lower down the salary bracket, for someone on £35,000 a year, another good value example is the MG4. One of these can be obtained on salary sacrifice for £388 a month, on a 48 month lease, with 8,000 annual miles.
Benefits to employers
On the sustainability front, offering EVs specifically will help push participating businesses towards net zero operations, particularly important for those who want to promote a green image.
Additionally, in EZOO’s specific case, it doesn’t require EVs on its scheme to be on longer-term contracts – so whether an employee with a car under the scheme has to be let go, or hands their notice in, the employer will not be stuck paying for said EV for years on end. If the employee does resign during the initial contract period, which isn’t covered by risk protection, then the employee is liable for early termination charges.
Furthermore, as the costs of each EV acquired on a salary sacrifice scheme come completely out of the employee’s payslip, the scheme essentially carries no cost to the business, with little to no admin required on the side of the business – overall making it a pretty effective zero-cost retention strategy.
Lash added:
“The benefit to the employer is that our scheme is at net zero cost to them. We also have market leading risk protection for both the employer and employee.”
Benefits to employees
As well as the obvious money saving versus leasing the same EV outright, these schemes can bring more certainty to employees. With aspects like tyres and general maintenance included in the cost, as in EZOO’s case, employees don’t need to worry about unforeseen, costly bills – simply budgeting for the same amount that’ll be deducted from their payslip every month.
Lash said:
“The benefit to employees is the most obvious factor: Depending on their tax bracket, they can save between 30-60% on an electric car.”