Is Salary Sacrifice Still Worth It with Electric Car Schemes in 2025
Electric car salary sacrifice schemes have become one of the most attractive employee benefits in the UK over recent years. They allow workers to drive new electric vehicles while saving on tax and National Insurance. But with changing benefit-in-kind rates and rising lease costs, many are wondering whether these schemes are still worth it in 2025. This article looks at how salary sacrifice works for electric cars, what’s changed since the early days of the scheme, and how to decide if it still makes financial sense.
What is a salary sacrifice scheme for electric cars
A salary sacrifice scheme lets an employee give up part of their gross salary in exchange for a non-cash benefit, such as an electric car lease. Because the sacrifice is made before tax and National Insurance, it reduces the employee’s taxable income, which can lead to significant savings.
The employer arranges the lease through a specialist provider and deducts the cost from payroll. The employee then uses the car for both personal and business travel. The key advantage is that electric cars have a much lower benefit-in-kind (BiK) rate than petrol or diesel vehicles, meaning employees pay far less tax for the same level of benefit.
In essence, salary sacrifice for an EV gives drivers a way to lease a new car at a lower cost than if they were to take out a personal lease.
How salary sacrifice savings work
To understand whether salary sacrifice is still worthwhile, it’s important to see where the savings come from.
When you give up a portion of your salary, your income tax and National Insurance are calculated on the reduced amount. Because the car is provided as a company benefit, you then pay a small amount of tax based on the vehicle’s benefit-in-kind value.
The benefit-in-kind rate for electric cars remains very low in 2025 at 2% of the car’s list price. This means that even high-value EVs can cost relatively little in company car tax.
For example, a driver earning £45,000 who sacrifices £500 per month for an electric car might save more than £200 per month in combined tax and National Insurance compared with leasing privately.
What’s changing in 2025 and beyond
From April 2025, the UK government is gradually increasing the benefit-in-kind rate for electric cars by 1 percentage point per year, rising to 3% in 2025 26, 4% in 2026 27, and 5% in 2027 28.
While this means electric cars will become slightly more expensive from a tax perspective, the difference remains small compared with traditional petrol or diesel vehicles. For context, the average benefit-in-kind rate for petrol cars in 2025 is between 25% and 37%, depending on emissions.
This gradual rise gives both employees and employers time to plan ahead. Even with the increase, EV salary sacrifice remains highly tax-efficient compared with other options.
Why electric car salary sacrifice remains popular
Several factors continue to make these schemes attractive in 2025:
Low running costs: Electricity is generally cheaper than petrol or diesel, especially when charging at home.
No congestion charge or ULEZ costs: Many cities still exempt electric cars from these fees.
Lower maintenance costs: Electric cars have fewer moving parts and often come with servicing included in the lease.
Environmental benefits: Driving an EV aligns with corporate sustainability goals and reduces carbon footprint.
Convenient packages: Salary sacrifice schemes usually include insurance, servicing, breakdown cover, and road tax, giving a simple all-inclusive cost.
When salary sacrifice may not be worth it
Despite its advantages, salary sacrifice is not ideal for everyone. There are a few situations where the benefits may be limited.
1. Low-income earners
If sacrificing part of your salary brings your pay below the National Minimum Wage, you will not be eligible for the scheme. Employers must ensure that after deductions, your pay remains compliant with minimum wage laws.
2. Short-term employment
Because most leases run for two to four years, the scheme is best suited for employees who plan to stay with their employer for that period. Leaving early can lead to early termination charges, which can be expensive.
3. High-mileage drivers
If you drive significantly more miles than average, the lease may include additional mileage charges, which reduce the overall value of the deal.
4. Private car ownership preference
Some people prefer to own rather than lease. Salary sacrifice is a lease arrangement, meaning you return the car at the end of the term. There is no option to buy unless your employer’s provider allows it under specific terms.
Employer benefits in 2025
Employers also benefit from offering EV salary sacrifice schemes. They can enhance their benefits package, attract staff, and promote sustainability goals without significant extra cost.
Employers save on Class 1A National Insurance because they pay this only on the benefit-in-kind value, which is far lower for electric cars. Many also gain from improved employee retention and satisfaction as staff enjoy access to premium vehicles at affordable rates.
Some businesses use these schemes to replace traditional company car programmes, reducing overall fleet costs and carbon emissions.
Comparing salary sacrifice to personal leasing
In most cases, salary sacrifice still offers better value than personal leasing because of the tax savings.
A personal lease is paid with post-tax income, and the driver is responsible for insurance, maintenance, and other running costs. With salary sacrifice, all of these are usually included, and payments come from pre-tax salary, reducing the overall cost.
However, the benefit depends on your tax band. Higher-rate taxpayers often see the largest percentage savings, while basic-rate taxpayers save less in absolute terms but still benefit from the convenience and simplicity of the package.
Example of savings in 2025
Let’s take an example. Suppose an employee earning £50,000 per year joins a salary sacrifice scheme for a new electric car costing £550 per month.
Salary before sacrifice: £50,000
Salary after sacrifice: £43,400 (saving £6,600 per year)
Income tax and National Insurance savings: around £2,600
Benefit-in-kind tax at 3% (2025 26): about £450 per year
Total effective annual saving: around £2,100, plus the benefit of having an all-inclusive lease.
Even after the 2025 increase in benefit-in-kind rates, the scheme remains significantly cheaper than leasing privately.
Tax and National Insurance implications
It’s important to remember that reducing your salary through salary sacrifice can slightly affect certain benefits or financial products linked to your gross pay. These may include:
Pension contributions (if based on your post-sacrifice salary)
Life insurance or death-in-service cover
Maternity or paternity pay calculations
Mortgage affordability assessments
Most large employers design schemes carefully to limit these side effects, but it’s worth confirming how your benefits are calculated before signing up.
Environmental incentives and future trends
The government continues to promote the switch to electric vehicles through grants, charging infrastructure investment, and low benefit-in-kind rates. As more electric models enter the market and battery ranges improve, EV salary sacrifice is expected to remain an attractive employee benefit throughout the decade.
Many companies are also introducing green fleet policies that reward employees for choosing low-emission vehicles. Salary sacrifice helps businesses meet corporate social responsibility targets while giving staff tangible financial savings.
Practical advice before joining a scheme
Before committing to an electric car through salary sacrifice, consider the following:
Calculate the true cost including benefit-in-kind tax and mileage limits
Check your salary after sacrifice remains above the minimum wage
Confirm what happens if you leave your job early or go on unpaid leave
Review how it affects your pension and other benefits
Compare with a personal lease to ensure the savings justify the commitment
Taking a few minutes to review the fine print can prevent unexpected costs later.
Final thoughts
In 2025, salary sacrifice remains one of the most cost-effective and environmentally friendly ways to drive a new car. The low benefit-in-kind rate for electric vehicles continues to make it attractive, even with gradual tax increases in future years.
For most employees, the savings in tax, National Insurance, and running costs outweigh the downsides, particularly when schemes include maintenance and insurance.
As the UK moves toward its net zero goals, salary sacrifice for electric cars is likely to stay a key part of employee benefit packages well beyond 2025. For those who qualify and plan to stay with their employer, it still represents excellent value and a simple path into electric driving.