Salary Sacrifice

What is an EV Salary Sacrifice scheme?

An electric vehicle salary sacrifice scheme, allows you to offer your employees an attractive and affordable way to drive a brand-new electric vehicle.

A business may adopt a salary sacrifice scheme, which allows it's employees to drive an electric vehicle (EV or PHEV), for a fixed monthly cost taken direct from their salary.

The amount is deducted before income tax and National Insurance, creating savings and reducing the cost of the vehicle.

Setting up a salary sacrifice scheme costs nothing for businesses with over 250 eligible employees and can provide benefits to both the business and it's employees.

How does Salary Sacrifice work?

The process is simple.

Employees select a car from a list, and then you deduct the monthly rental cost from their salary.
The important bit is that this deduction comes from their pre-tax income, so it’s before they pay income tax and National Insurance. This means they reduce their yearly tax bill.
They would then normally then have to pay benefit-in-kind (BIK) tax for the use of the car at the same rate as their income tax band.
However, with electric cars there are some very generous tax rules that significantly reduce the BIK tax rate – and these are set to stay in place for the next few years at least.

This makes salary sacrifice one of the cheapest ways to drive a new electric car.

How can EV salary sacrifice benefit your organisation?

Lombard Vehicle Solutions' EV Salary Sacrifice Scheme is provided by Ayvens, one of the UK’s largest fleet funding and management companies, which has worked with hundreds of eligible businesses, implementing salary sacrifice schemes tailored to their unique needs and driver profile.

Benefits of setting up a Salary Sacrifice scheme include:

Could help reduce carbon emissions for business operations
Improve staff recruitment and retention
Potential savings from reduced class 1 National Insurance contributions
Risk mitigation packages included to protect employers, including early termination cover

What to consider before launching a salary sacrifice scheme

An effective supplier is an integral part of a successful salary sacrifice scheme. Our consultative approach can help you answer the key questions before the scheme is introduced – and we can then support you throughout its life as well.

Who will run the scheme?

A single point of contact for the leasing company can help ensure the scheme is managed properly and continues to fit your goals – such as restricting choice lists to electric vehicles.

Can employees afford the rentals?

Although salary sacrifice can be made available to all employees, the monthly payments can't take their remaining pre-tax income below the minimum wage threshold.

How are you managing risk?

There are financial risks we can help you manage. Early termination cover for monthly payments in case of long-term sick leave, redundancy, resignation or salary reduction is included as standard. Fully comprehensive motor insurance, is also provided with our salary sacrifice schemes.

How will you explain the scheme to employees?

We can help you introduce the scheme to employees, so you can make them aware that it is a genuine benefit that they should be keen to explore. This can include a range of support materials, such as our employee guide.

How will it fit with other car schemes?

Salary sacrifice can complement a traditional company car scheme, and some employees may be eligible for both. We can help develop a driver portal that meets your business needs; either presenting both schemes together for easy comparison or separating drivers based on their circumstances to avoid confusion.

What Benefit in Kind rates will employees pay?

Understanding how taking the option of a salary sacrifice vehicle affects the tax they pay is important to employees.

Using the latest Benfit in Kind (BiK) rates, our Company Car Tax calculator gives and indication of the tax rates due depending on the specific vehicle taken.

Use tax calculator

Speak to the team today

Our EV Salary Sacrifice scheme lets employees pay for an electric car from their gross salary. We're ready to help take those next steps with you. Fill in your details below and we'll be in touch to help you navigate a changing world.