Electric Car Scheme: Eco-Friendly Vehicles

At Fleet Evolution, we’ve spent over ten years helping businesses and employees navigate the ins and outs of implementing an electric car scheme. We know there’s a lot to consider, from understanding the tax advantages to knowing how these schemes impact workplace sustainability efforts.

In this guide, we aim to break down everything you need to know about electric car salary sacrifice.

What is an Electric Car Scheme?

It’s a straightforward and budget-friendly way for employees to get an electric car. You give up a portion of your salary (before tax) to lease the vehicle, this is called salary sacrifice. This can save you money by lowering your Income Tax and National Insurance Contributions, making it easier and cheaper to drive eco-friendly.

For employers, it’s a great perk that can help meet sustainability goals, attract talent who care about the environment, and support greener habits in the workplace. At Fleet Evolution, we also offer a carbon counting service to help you keep track of your CO2 savings.

How Does Fleet Evolution’s Car Scheme Work?

Here’s a breakdown of how an electric car salary sacrifice scheme works in practice, including all the admin steps and key elements of a typical scheme.

Step-by-Step Breakdown

Choosing your Salary Sacrifice Car
Employees can pick an electric vehicle that fits their needs from the options provided by the scheme. There’s usually a good mix of cars to choose from, making it easier for everyone to find something that works for their budget and style.
Salary Sacrifice Agreement
You and your employer will agree on how much will come out of your gross salary each month. This amount will help cover the cost of leasing the EV, along with any added benefits like maintenance or insurance if it’s included.
Monthly Payroll Adjustments
After deciding on the sacrifice amount, payroll will adjust your salary. This means each monthly payment goes straight toward the car lease before you receive your salary, lowering your taxable income and reducing the Income Tax and NIC you have to pay.
Managing Leaver Protections
If you leave the company before your contract is up, many providers have protections in place to keep any surprise costs at bay. You can either return the car or transfer it according to the rules set when the scheme started. Companies like Fleet Evolution usually help with these details, making it easier for everyone involved.

Benefits of an Electric Car for Employees

Our electric car program offers great financial help and lifestyle perks for employees, plus it comes with maintenance and insurance coverage. This makes switching to an electric car easy and budget-friendly.

Tax and NIC Savings

By using salary sacrifice, employees reduce their pre-tax salary, which in turn reduces the amount of Income Tax and employee NIC they pay. This can result in hundreds, if not thousands, saved annually, depending on the employee’s tax bracket and the specific EV model chosen. Following the Autumn 2024 budget, the Benefit-in-Kind tax rate for electric cars is also set to stay under 5% until 2028, keeping costs down while making electric a smart choice.

Access to Affordable, Eco-Friendly Cars

Salary sacrifice schemes make even premium EV models more accessible. For example, leasing a BMW i4 through salary sacrifice can cost significantly less per month than if leased independently, making this high-tech EV an affordable option for many employees.

Lower Running Costs

EVs offer substantial savings on fuel and maintenance. With electricity typically cheaper than petrol or diesel and fewer moving parts in EVs (meaning fewer repairs), employees benefit from lower running costs over the vehicle’s life.

Employers Introducing the Scheme

If you're an employer looking to introduce salary sacrifice to your company, book a call to speak with the Onboarding Team below!

Speak with the Onboarding Team!

Employees Going Green

If you're an employee looking to find out more about green motoring through salary sacrifice, book a call to speak with the Driverline Team below!

Book a Driverline Call!

Benefits of an Electric Car Scheme

Introducing an electric car salary sacrifice scheme brings a host of benefits to employers, from supporting sustainability goals to enhancing employee satisfaction.

Sustainability Goals

An electric car scheme is an effective step toward a more sustainable business model. By supporting employees in switching to electric cars companies actively reduce their collective carbon footprint, contributing to broader environmental goals and enhancing their green credentials. This commitment to sustainability can resonate positively with clients, partners, and the workforce, highlighting the company’s proactive stance on environmental responsibility.

Improved Employee Satisfaction and Retention

Offering an electric car scheme is a unique and valued employee benefit that can set employers apart. With a salary sacrifice scheme, employees access EVs at a lower cost, aligning with many individuals’ desire for eco-friendly commuting. This added value in their benefits package can boost morale, improve job satisfaction, and ultimately contribute to stronger retention rates.

Tax Benefits and Reduced National Insurance Contributions (NIC)

Employers can benefit financially through reduced NIC on the portion of the salary that employees sacrifice. As employees’ pre-tax income is adjusted for the scheme, employers can enjoy massive savings savings in NIC, adding a financial advantage to the overall sustainability of the scheme. This can be particularly appealing for companies looking to enhance their benefits offering without significant additional costs.

Minimal Administrative Burden

A well-structured salary sacrifice scheme is designed to be hassle-free, with providers like Fleet Evolution handling the bulk of administration. This means employers can offer a desirable benefit with minimal extra workload, allowing HR and finance teams to focus on other strategic priorities. From setting up the scheme to ongoing management, the process remains straightforward and efficient, keeping it easy for employers and employees alike.

What is Included in an Electric Car Scheme?

Here’s an overview of what’s typically included in an electric car scheme.

1. Fully Inclusive Leasing Package

The core of an electric car salary sacrifice scheme is the fully inclusive lease. This means the employee’s monthly payment covers not just the cost of the car but also essential services that ensure they enjoy a smooth driving experience. These typically include:

Insurance: Comprehensive insurance, including cover for accidents and theft, is usually bundled within the package, simplifying insurance management for employees.
Maintenance and Servicing: Routine maintenance, servicing, and even MOTs are included in many schemes, covering the essentials so employees can keep their EV in optimal condition.
Breakdown Cover: Roadside assistance is a common feature, providing peace of mind for drivers in the event of unexpected issues.

2. Flexible Charging Solutions

For an EV scheme to be truly convenient, charging options are key. Many providers offer home or work charging solutions as part of the package or have partnerships with charging companies. This can be invaluable for employees new to EVs, as it supports them with a reliable charging setup.

3. Mileage Allowance

Most schemes include a mileage allowance based on the employee’s expected annual usage. Should the employee exceed their agreed mileage, many providers offer a reasonable per-mile fee, making the scheme adaptable to real-life driving requirements.

4. Leaver Protection

One of the major concerns for employers is what happens if an employee leaves mid-contract. With built-in leaver protection, the scheme provides safeguards to prevent unexpected costs for the business. This might mean the vehicle can be returned, reassigned to another eligible employee, or managed by the scheme provider until the contract ends, minimising financial risks for the employer.

5. Tax and NIC Savings

While not a “feature” in the traditional sense, the tax and National Insurance Contribution (NIC) savings are a key advantage. By sacrificing a portion of pre-tax salary, employees can benefit from lower lease costs, making a premium EV more affordable than it might be on the open market. You can even find calculators to help figure out your savings!

How to Set Up an Salary Sacrifice Scheme for Your Business

Setting up an electric car salary sacrifice scheme for your business can be quick and easy with the right leasing company.

Choosing Fleet Evolution ensures you’re backed by a trusted partner who handles most of the admin work, from the policy setup to the compliance checks.

Our award-winning service has supported over 600 companies of all sizes, and with our perks like the ‘hand back the keys’ option, we help protect you if an employee leaves mid-contract, which saves you lots of financial risk.

Best of all, we can have your scheme set up in just 24 hours, so you’re ready to roll quickly and effortlessly.

Ready to make the switch? Get in touch here or visit our Employer Zone below!

Get in Touch

Fleet Evolution offers innovative salary sacrifice schemes, helping employers and employees save on costs while promoting eco-friendly electric cars. Enjoy easy setup, free maintenance, and swift activation for any company size.

FAQs

We’ve gone through some of the questions most frequently asked on electric car salary sacrifice.

Is There a Government Grant for Buying an Electric Car?

Currently, government grants for purchasing new EVs have been phased out in the UK. However, there are still incentives for those adopting electric vehicles, including reduced Benefit-in-Kind (BiK) tax rates for company car drivers and savings on road tax and congestion charges in certain areas. Through salary sacrifice, employees can further benefit by paying for their EV out of pre-tax income, making electric car leasing a more affordable and accessible option. Interested in how else you can lower costs with a salary sacrifice car? Find out more in our electric vehicles savings blog post.

Are Electric Car Schemes Worth It?

Electric car salary sacrifice schemes can be highly worthwhile, particularly for those looking for a cost-effective, eco-friendly transport solution. With reduced monthly costs due to tax and NIC savings, employees can drive premium EVs at a fraction of the price. Employers benefit too, by saving on NICs for ultra-low emission vehicles. Check out our blog post on why electric cars are worth the salary sacrifice for more details.

What Are the Negatives of a Salary Sacrifice Car?

While there are many positives, it’s essential to consider the potential downsides. A salary sacrifice arrangement reduces an employee’s gross salary, which could slightly affect benefits tied to income levels, like pensions or maternity pay. Additionally, if an employee exceeds the agreed mileage limit or leaves the company mid-contract, there may be extra costs to manage. Many providers, like Fleet Evolution, offer leaver protections to minimise these risks, but it’s always wise to review the terms and ensure they align with individual financial circumstances.

Do I Need to Tell HMRC About a Salary Sacrifice Car?

Employers are responsible for notifying HMRC of any salary sacrifice arrangements. Providers like Fleet Evolution simplify this by ensuring compliance checks and assisting with the necessary payroll adjustments. For employees, the tax benefits are applied automatically through payroll, so there’s generally no need to report it to HMRC directly, although it’s worth consulting your employer to confirm all processes are in place.

How Are Company Cars Taxed?

Employees pay tax for company cars based on their market value, as well as their value to the employee. As the HRMC clarifies, the value of the car is reduced if:

The employee uses it part-time
The employee contributes to its cost
It has low CO2 emissions

Charlotte Matthews

Published on 15th January 2025

Electric Car Scheme: Everything You Need to Know