Salary sacrifice schemes for electric vehicles (EVs) have exploded in popularity across the UK. It is one of the most tax-efficient ways to own a car, thanks to aggressive government incentives designed to push green transport.

But how does it actually affect your take-home pay? And is it worth it compared to a personal lease? Let’s break it down.

The Core Concept

You agree to give up part of your gross salary before tax is deducted. In exchange, your employer provides you with a fully insured, maintained electric car.

1. Gross Pay Drops

Your taxable income decreases, meaning you pay less Income Tax and National Insurance.

2. Tax Savings

For a Higher Rate taxpayer (40%), you save 40p in tax and 2p in NI for every £1 sacrificed.

3. Small BiK Tax

You pay a tiny "Benefit in Kind" tax, currently capped at just 2% for EVs until 2025.

Benefit in Kind (BiK) Rates for 2025/26

The government has kept BiK rates for electric cars intentionally low to encourage adoption. While petrol cars can attract BiK rates of up to 37%, electric cars sit at:

2024/25: 2%
2025/26: 3%
2026/27: 4% (Projected)

Even at 3% or 4%, the tax you pay is negligible compared to the income tax savings on the salary you sacrificed.

Example Calculation

Let's say you earn £60,000 a year and choose a Tesla Model Y on salary sacrifice costing £600/month gross.

Gross Salary Sacrificed: £7,200 / year
Income Tax Saved (40%): £2,880
NI Saved (2%): £144
Total Saving: £3,024

Result: That £7,200 car actually costs you around £4,176 from your net pay, or roughly £348/month including insurance and maintenance.

Want to see your own impact?

Use our main salary calculator to input your "Reduced Gross Salary" and see exactly what lands in your bank account.

Go to Salary Calculator

Key Considerations

Impact on Mortgage Lending

Because your gross salary is technically lower, some mortgage lenders might offer you a smaller loan. However, many modern lenders now accept "Salary Sacrifice" as a commitment rather than a permanent salary reduction. Always check with a broker.

Pension Contributions

If your employer calculates pension contributions based on your notional (pre-sacrifice) salary, your pension remains unaffected. However, if they base it on your reduced salary, your pension pot could grow slightly slower.