In a market where rising costs and fierce competition for talent collide, forward-thinking businesses are looking beyond traditional pay rises to keep their people happy. One of the most tax-efficient, future-proof benefits you can roll out right now is an electric-vehicle (EV) salary sacrifice scheme – and the advantages go far deeper than a shinier company car.
What exactly is a car salary-sacrifice scheme?
Put simply, employees agree to exchange (or “sacrifice”) part of their gross salary for the use of a brand-new, fully-maintained vehicle. Because the deduction happens before income tax and National Insurance are applied, staff pocket significant savings while enjoying fixed monthly costs that already cover insurance, servicing, maintenance and breakdown support. Employers benefit too: lower gross pay means reduced National Insurance contributions and, in many cases, pension liabilities.
Why 2025 is the tipping point
From April 2025 the Benefit-in-Kind (BiK) rate on zero-emission cars rose from 2 % to just 3 %, and HM Treasury has already confirmed annual increases will be capped at 1 percentage point through to at least 2027/28 – still a fraction of the 25 %+ rates applied to petrol and diesel vehicles.
Tangible gains for your business
- Significant savings – One finance director recently slashed thousands of pounds off payroll tax by swapping a cash allowance for an EV salary exchange. Those gains drop straight to your bottom line.
- Stronger retention – Replacing a single employee can cost 10 – 20 % of their salary once recruitment fees and lost productivity are factored in. A two- or three-year lease creates a “golden handcuff” effect: staff are far less likely to jump ship mid-term when they’re driving a car that’s clearly funded by you.
- ESG credibility – Transitioning even a portion of your fleet to electric can slice your Scope 3 emissions and strengthen tender submissions that now demand concrete sustainability evidence.
Why employees love it
| Running-cost snapshot | Typical petrol hatchback | Electric car via home charging |
|---|---|---|
| Fuel / energy cost* | ≈ 12.9p per mile | < 5p per mile |
*Average figures based on AA and industry data, July–August 2024. fleetnews.co.ukgbcarleasing.co.uk
Add in lower BiK, zero road tax until 2025/26, quieter driving and access to the latest safety tech, and it’s easy to see why take-up is accelerating.
Common concerns – and how to neutralise them
- “What if an employee leaves early?” — Most modern providers offer early-termination insurance, so you’re not left footing the bill.
- “Will lower gross pay hurt mortgage applications?” — The scheme is optional; staff can opt out if they’re house-hunting.
- Credit exposure — Each lease sits on the company’s balance sheet, but careful forecasting (and starting with a pilot group) keeps this manageable.
Got questions?
Talk to our Salary Sacrifice Specialist, Warren Keech.
Getting started with Rivervale
- Scoping call – Our specialists model the tax and NI savings for your exact workforce.
- Payroll & policy setup – We handle documentation, payroll integration and staff comms.
- Launch & educate – Interactive webinars, personalised quotes and a self-service portal drive adoption.
- Ongoing support – From charger grants to end-of-term swaps, Rivervale has you covered.
The road ahead
With BiK locked at single-digit rates for years, electricity still half the cost of petrol, and sustainability climbing every board agenda, EV salary sacrifice is no longer a “nice-to-have” perk – it’s a strategic lever for growth, retention and ESG impact. Ready to explore the numbers for your team? Talk to Rivervale’s Salary-Sacrifice expert, Warren Keech or use our calculator for a bespoke savings illustration.
