Electric cars are reshaping Britain’s roads and our environment, offering a greener alternative for conscious drivers. With the rise of salary sacrifice electric car schemes in the UK, accessing these eco-friendly options has never been more affordable. This guide dives into how you can leverage one of the newest schemes, salary sacrifice for used EVs, developed by industry leaders like Octopus EV, to not only cut costs but also contribute to a sustainable future.
Navigating the UK's electric car salary sacrifice scheme
In the UK, salary sacrifice electric cars, commonly referred to as EV sal-sac, have been gaining traction thanks to supportive government policies. Understanding salary sacrifice schemes in the UK can yield significant tax and cost benefits to you.
How does sal-sac work?
When you’re in an EV salary sacrifice scheme, you’re typically leasing the car. The specifics can vary, so the ideal move is to check in with your employer for your company’s particular arrangement. Regardless, the upshot here is that the cost of the lease comes out of your salary before taxes, reducing your income tax and National Insurance contributions. It’s a clever way to repurpose money that would have otherwise flown directly to the HMRC and set you up in a new electric car.
While you could also opt for a salary sacrifice scheme with petrol or diesel vehicles, the real draw is with the electric ones. Exceptionally low Benefit-in-Kind (BiK) tax rates for electric cars make the difference. We’re talking about a BiK rate as low as 2% for 2024/25, which will see a slight uptick to a still modest 5% by 2027/28.
How to calculate BiK?
It’s pretty straightforward: take the electric car’s value and apply the BiK rate. The resulting figure is your annual ‘benefit’ value, meaning you’ll pay income tax on this amount at your usual rate, whether it’s basic, higher, or additional.
For example, if you choose an EV that’s valued at £30,000 and the BiK rate is 2%, then your benefit value is £600. If your regular tax rate is 20%, you’re only paying £120 per year for your leased electric car. The BiK rate can go up to 37% for diesel or petrol cars.
This has been one of the successful policies the UK government supports in the transition to electric cars - the stats speak volumes: a whopping 90% of new cars acquired through salary sacrifice are zero-emission vehicles, according to recent data from BVRLA.
Salary sacrifice for used Electric Vehicles (EVs)
Up until 2023, salary sacrifice has been predominantly focused on new EVs, with the procedure just explained. Recently, however, industry innovators like Octopus EV have adopted salary sacrifice schemes for used EVs. These trailblazers spotlight the combination of further affordability and sustainability, making used electric car leasing not just an economic choice but a smarter one.
- Octopus EVOctopus EV pioneers an innovative approach with their ‘Nearly New’ salary sacrifice scheme. You can lease popular models like Renault Zoe and Vauxhall Mokka-e for around £300 a month, inclusive of fuel, insurance, and maintenance. These vehicles, all under two years, indicate a promising direction for the EV market as you can have a taste of EVs at a cheaper price.
- loveelectric is carving a niche with the ‘Re-lovelectric.cars’ scheme, directly targeting second-hand EV leasing. Their emphasis is clear: to make driving an EV accessible to more people without compromising quality. Joining their salary sacrifice program unveils a spectrum of financial benefits in the form of tax reductions explained above.
- Pink Salary ExchangePink Salary Exchange offers a distinct approach in the salary sacrifice space. Catering to second-hand EV leasing, they provide flexible contracts with competitive rates. Participants can expect potential savings, occasionally up to 25%, showcasing their focus on economic solutions in the used EV arena.
The second-hand EV market: opportunities amidst challenges
While the used EV market shows promise with salary schemes, it navigates a tricky balance. For those considering a second-hand electric car, be it to buy or to lease, the conversation often circles back to battery health - a pivotal factor in the decision-making process.
Introducing our EV Health Checker: a game-changer for the used EV market. Harnessing the power of advanced AI and mobile telemetry, our innovative app delivers a precise and independent assessment of an EV’s range and performance. With its self-service design, there’s no need for additional devices or technical complexities. Simply put, ClearWatt offers clarity and confidence to strengthen trust in used EV salary sacrifice schemes and boost their adoption.
Conclusion
In the evolving landscape of EVs, salary sacrifice schemes, especially when focusing on used EVs, emerge as a potent combination of affordability and sustainability. With champions like Octopus EV, loveelectric, and Pink Salary Exchange at the forefront and tools like ClearWatt’s EV Battery Health Checker ensuring transparency, the future looks promising.
