Salary sacrifice can reduce the amount of salary on which you pay Income Tax and National Insurance, depending on the arrangement and your individual circumstances.

For eligible electric vehicle salary-sacrifice schemes, you exchange part of your gross salary for the use of an electric vehicle. This can make an EV more tax-efficient than paying for the vehicle from your take-home pay.

Salary sacrifice does not automatically mean you need to complete a Self Assessment tax return. Your employer will normally account for the relevant tax through PAYE.

Salary sacrifice can affect your tax position, but it does not automatically mean your tax code will change.

When you exchange part of your salary for a benefit such as an electric vehicle, your taxable salary may be reduced. Your employer reports your pay and taxable benefits to HMRC through PAYE, and HMRC may update your tax code where necessary.

Your tax code depends on your individual circumstances, including your income and taxable benefits. If your tax code changes, HMRC will normally notify you and your employer.

Salary sacrifice can affect certain benefits that are based on your earnings or National Insurance contributions.

Because salary sacrifice reduces your contractual cash salary, it can reduce the earnings used to assess entitlement to some contributory benefits. The effect depends on the type of benefit and your individual circumstances.

Benefits that may be affected can include:

• State Pension – your entitlement is based on your National Insurance record, so it’s important to ensure you continue to receive qualifying National Insurance credits or pay sufficient contributions.
• Statutory Maternity Pay – the amount you receive is based partly on your average weekly earnings, so a salary sacrifice arrangement may affect the calculation.
• Contributory benefits – certain benefits, including contribution-based Jobseeker’s Allowance, are linked to your National Insurance record and may be affected in some circumstances.

If you’re considering salary sacrifice, check how the arrangement could affect your individual circumstances before making a decision.

An electric car salary sacrifice scheme allows an employer to offer an electric vehicle as an employee benefit.

The employee agrees to give up part of their gross salary in exchange for the use of an electric vehicle. The employer provides the vehicle, while the employee benefits from the tax-efficient treatment available to qualifying electric company cars.

Rather than simply sacrificing salary, it’s an opportunity to exchange part of your salary for a valuable benefit.

For eligible employees, this can make driving an electric vehicle a tax-efficient option, while employers can use the scheme as part of their wider employee benefits package.

Electric vehicles can be particularly tax-efficient when provided through a salary sacrifice scheme. They benefit from lower Benefit in Kind tax rates than many petrol and diesel company cars, which can make them an attractive choice for employees.

The amount an employee can save depends on the vehicle chosen, the amount of salary sacrificed and the employee’s individual tax and National Insurance position.

The result? Salary sacrifice can make driving a new electric vehicle significantly more affordable than paying for one from take-home pay.

Tax rates and rules can change over time.

Certainly! The advantages of a salary sacrifice car scheme are manifold, benefiting both you as the employer, your employees, and, of course, the environment. This scheme is tailored to prioritise our people and the planet. If you’re interested in discovering how it can contribute to the success of your business, our friendly team is ready to provide guidance on the next steps.