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Andrew Leech
I’ve been helping teams go green for over a decade! Ready to green your fleet?
How This Unsung Benefit Has Come of Age
Salary sacrifice cars might still sound niche, but this benefit has now matured into a powerful and cost-effective tool in any modern reward manager’s portfolio. Despite being around for over a decade, only 5% of our audience at events are aware of it. Why? Because it’s constantly evolving. And some think they no longer qualify.
They couldn’t be more wrong.
A Brief History: From Bikes to BMWs
Salary sacrifice began life in the early 2000s as a clever way to save on childcare, cycle-to-work schemes and even tech purchases. It was about using pre-tax salary to unlock corporate buying power.
By the mid-2010s, the first car salary sacrifice schemes hit the road, primarily for large employers. These early adopters enabled employees to lease a car from their gross pay. That meant VAT savings, reduced NI, tax advantages, and access to corporate fleet discounts. For high-mileage staff, it was a game-changer.
2012: The Year We Plugged In
We launched our first all-electric schemes, and since then? We’ve grown with our clients, some now boasting over 10,000 employees.
In the early years, the savings were significant across all vehicle types. But the taxman caught up. By 2016, higher-emission vehicles started attracting hefty company car tax. That narrowed the field to plug-ins, electric vehicles (EVs), and the most efficient petrol or diesel models.
Still, interest didn’t wane. By 2016, so many items were being run through salary sacrifice, everything from iPads to prosecco, that HMRC had to intervene.
2016: A Tax Tidy-Up
HMRC restricted the salary sacrifice benefit. From 2017, only certain categories, like EVs, ultra-low emission vehicles and cycles, retained full tax advantages.
Gone were the days of sacrificing salary for flat-screen TVs and wine chillers without a benefit-in-kind tax. But low and zero-emission vehicles were spared. This signalled a shift in government policy: towards environmental incentives and employee mobility.
Employers Introducing the Scheme
Employees Going Green
The 2020s: The EVolution Begins
2020 marked a major turning point. There were incentives and grants aplenty to encourage drivers to go electric, and there was no road tax for EVs. Benefit-in-kind is a benefit tax on company cars, which is based on the CO2 a car emits. As electric cars have zero emissions, they were tax-free for a short while, but it was slowly reintroduced:
2020/21: 0% BIK
2021/22: 1% BIK
2022/23: 2% BIK (locked in until April 2025)
With salary sacrifice added to the mix, EVs became even more affordable. Employees were seeing up to 50% savings on monthly lease costs compared to buying outright or on PCP.
Manufacturers also stepped up. By 2022, over 2,000 low- or zero-emission models were available under the scheme. Suddenly, salary sacrifice wasn’t just a perk, it was a practical solution for mental wellbeing, financial flexibility and environmental impact.
2025: What’s New in the Scheme?
Benefit-in-Kind (BIK) Rates
The freeze at 2% BIK for EVs ended in April 2025. But there’s good news:
2025/26: 3% BIK
2026/27: 4% BIK
2027/28: 5% BIK
Still staggeringly low, and fixed. That makes long-term planning easier, for both employers and employees.
We’ve put together a table for the next few years’ BIK rates for low emission vehicles, so you can plan even harder.
Road Tax Changes (VED)
From April 2025, EVs will no longer be exempt from Vehicle Excise Duty:
A flat standard rate of £190 applies to all EVs
This is built into salary sacrifice lease quotes, so employees won’t feel the impact directly
Scheme Popularity
With EVs more affordable than ever through salary sacrifice, scheme uptake has exploded:
SMEs now account for 60% of new schemes
Larger corporates increasingly use salary sacrifice to hit Scope 3 carbon targets
Over 70% of orders now come from employees who’ve never had a company car before
Why It Works for Everyone Now More Than Ever
No upfront costs for employers
No risk, early termination protection covers leavers
Big savings for employees, even with new tax rules
Improved wellbeing, budget-friendly driving with no nasty surprises
Real sustainability impact without sacrificing choice
Why Forget About a Benefit Like This?
It helps your team’s wallets and wellbeing, as well as your retention and CSR.
Ready to offer your team an unforgettable benefit?
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.