Can you lease an electric car through salary sacrifice?

Salary sacrifice car leasing is an increasingly popular scheme for businesses in the UK, and for good reason. It provides employees with affordable car leasing options at a fixed monthly cost. Electric cars are surging in popularity too, as drivers look to make greener choices and reduce their running costs. But the question is, can you combine the two?

Let’s look at your electric car salary sacrifice options and talk you through the most commonly asked questions. This should allow you to understand salary sacrifice in more detail and if you or your employer are eligible.

How does salary sacrifice work for electric vehicles?

An electric car salary sacrifice scheme works by reducing part of an employee’s salary. A fixed monthly amount is taken and put towards the car lease cost. In return they get access to a non-cash benefit — a choice of our electric car lease deals. This is an agreement entered into by both the employee and the employer.

Introducing a salary sacrifice car lease scheme offers significant benefits for all parties and is a great way to enhance a company’s green credentials. By driving an all-electric car and transitioning to zero emission, employees can save money on anything from income tax and national insurance to running and maintenance costs.

What is included in an EV salary sacrifice arrangement?

Before entering into this scheme and choosing an electric car, it’s a good idea to understand what’s included and what your responsibility is as part of the agreement. For an employee who’s chosen salary sacrifice, their EV leasing contract will normally include:

  • The monthly lease cost, deducted from the gross salary
  • Routine maintenance and servicing*
  • Full breakdown cover
  • The manufacturer’s warranty
  • Insurance may be included, dependent on your scheme set-up, and is a requirement of driving the vehicle.

*The exact conditions and what’s covered are dependent on the maintenance package chosen.

What do employees need to pay for?

During a lease contract there will be several costs to be aware of. These will be the employee’s or driver’s responsibility and should be budgeted for accordingly. For example, they will need to pay for:

  • The cost of electric charging or fuel
  • Top up of oil, screen wash and anti-freeze between services
  • Any excess mileage at the end of the contract
  • Any mechanical failure or damage due to driver fault
  • Any rental cars when the car is off the road — if not provided as part of the insurance or by the manufacturer.

An employee will also have to pay benefit-in-kind tax (BIK), as the vehicle will be classed as a company car for tax purposes. It’s worth noting that all-electric vehicles on a salary sacrifice scheme have a BIK tax of just 2% until tax year 24/25.

However, the overall cost will depend on individual circumstances and the chosen EV lease deal. All costings and other relevant information will be provided when choosing between your leasing options, so you can always make an informed decision.

Salary sacrifice EV example

The cost of your salary sacrifice will depend on which electric car you opt for, as well as your bespoke lease configuration. Take a look below to see what a Tesla Model Y salary sacrifice lease would look like. If you’re not ready to move to electric, we’d suggest considering a hybrid lease car, as you can still benefit from low BIK.

What are the benefits of leasing an EV through salary sacrifice?

Access to an electric car through salary sacrifice can be a cost-effective and hassle-free way of sourcing a brand-new  vehicle. There are numerous key benefits to this scheme, which include:

  • Savings on income tax and national insurance
  • Low benefit-in-kind tax on electric cars
  • Synergy’s Feefo Platinum Trusted Service and access to a number of fleet discounts that offering additional savings
  • No up-front payment required and a fixed monthly rental agreed
  • No credit checks
  • Access to a brand-new vehicle for two, three, or four years, before handing it back
  • Flexible contract terms — choose your mileage and contract length.

Can anyone get an electric vehicle on the salary sacrifice scheme?

Your employer must first opt into the scheme to take advantage of salary sacrifice leasing. Once set up, there are usually some specific requirements set out by the employer which dictate who is eligible. These can range from:

  • A full UK driving licence
  • Some employers may restrict this scheme to those over 25 years old (for insurance purposes)
  • Length of service, e.g. with the business for at least 12 months
  • The salary sacrifice amount must not reduce your pay below the national minimum wage.

You do not have to be in full-time employment and can be in a temporary position. However you still need to meet a business’s eligibility criteria. The leasing contract must also not run for longer than your employment.

Who owns the vehicle in an EV lease salary sacrifice?

The employee will not own the vehicle throughout a salary sacrifice car lease. The lease car or EV will be on a contract hire agreement for the lease term. When the term ends, the car is handed back, and a new salary sacrifice lease can be put in place.

Alternatively, at the end of the contract, the employee can choose to revert back to their full salary. The salary sacrifice lease cannot be broken early without termination charges applying, so it is important employees are committed for the duration of their contract.

Which electric cars qualify for the salary sacrifice scheme?

The best way to check which electric cars are available is to contact our team directly. Manufacturers are investing heavily in new EV technology and putting their efforts into building the best electric cars in a competitive market.

Whether you’re looking for a small electric hatchback, like the Cupra Born and Vauxhall Corsa, or an electric SUV like the VW ID.4 and BMW IX, the Synergy team can help you find the perfect car to match your needs.

Is salary sacrifice worth it for an electric vehicle?

A salary sacrifice scheme can be an excellent option for employers and employees. Employees can drive a brand-new EV as a non-cash benefit and have a hassle-free leasing experience. However, a salary sacrifice lease will only be worth it if it meets your individual leasing needs.

Anyone considering this scheme should ensure you can comfortably afford the monthly salary deductions for the chosen lease term.