Electric Car Salary Sacrifice Calculator — 2025-26 Tax Year

How electric car salary sacrifice works

An EV salary sacrifice scheme allows employees to lease a brand-new electric vehicle through their employer, paid for via a reduction in gross salary. The arrangement works similarly to pension salary sacrifice: because the deduction is made before tax and National Insurance are calculated, the effective cost to the employee is substantially lower than arranging a personal lease.

A typical scheme includes the lease payment, comprehensive insurance, maintenance, breakdown cover, and road tax — all bundled into a single monthly salary deduction. The employee simply chooses their vehicle, and the monthly cost is deducted from their pay automatically.

The 2% BIK advantage

The reason EV salary sacrifice is so attractive is the extraordinarily low Benefit in Kind (BIK) rate for zero-emission vehicles. For 2025-26, the BIK rate is just 2% of the car's P11D value. Here is what that means in practice:

• A £35,000 EV has a BIK value of £700 per year (£35,000 × 2%)
• A basic-rate taxpayer pays £140 per year in BIK tax (£700 × 20%)
• A higher-rate taxpayer pays £280 per year in BIK tax (£700 × 40%)

Compare this to a petrol car with a BIK rate of 28%: the same £35,000 car would cost a basic-rate taxpayer £1,960 per year in BIK tax — fourteen times more. This dramatic difference is the core of why EV salary sacrifice delivers such substantial savings.

Worked example: employee savings

Consider an employee earning £45,000 who leases a £35,000 electric car through salary sacrifice with a monthly gross cost of £450 (£5,400 per year):

• Gross salary reduces from £45,000 to £39,600
• Income tax saving: £1,080 (basic rate) or £2,160 (higher rate)
• Employee NI saving: £432 (at 8%)
• BIK tax payable: £140 (basic rate) or £280 (higher rate)
• Net saving for a basic-rate taxpayer: approximately £1,372 per year
• Net saving for a higher-rate taxpayer: approximately £2,312 per year

That is a saving of £114–£193 per month compared to funding the same lease from net pay. Use our employee calculator to model your exact savings.

Employer benefits: NI savings and recruitment advantage

Employers save 15% NI (2025-26 rate) on every pound of salary sacrificed for an EV lease. For the example above, the employer saves £810 per participating employee per year. Across a scheme with 50 participants, that is over £40,000 in annual NI savings.

Beyond the direct financial saving, EV salary sacrifice schemes are increasingly important for talent attraction and retention. Employees consistently rate them as one of the most valued workplace benefits, and they support corporate sustainability commitments and ESG reporting obligations.

Our employer calculator can model the NI savings from an EV scheme alongside other salary sacrifice benefits such as pension contributions and cycle-to-work schemes.

BIK rates: future years

The government has confirmed EV BIK rates through to 2027-28, providing certainty for scheme planning:

• 2025-26: 2%
• 2026-27: 2%
• 2027-28: 3%

Even with the modest rise to 3% in 2027-28, EV BIK rates remain dramatically lower than ICE vehicles (typically 20-37%). Employers and employees can commit to 3-year leases knowing the tax advantages will remain highly favourable throughout the term.

NMW considerations for EV salary sacrifice

Because EV lease payments can be relatively high (£300–£700 per month), it is important to check that lower-paid employees are not reduced below the National Minimum Wage after sacrifice. Our calculators include automatic NMW compliance checks to flag any potential issues.

Read our comprehensive guide: Electric Car Salary Sacrifice: Employer Guide.