It sounds like there should be a catch, but not so – and here’s why. You, or your employees, give up a little gross salary and, thanks to advantageous tax breaks, you can drive an electric car for less money than leasing one from your taxed salary on the same terms.
It sounds slightly complicated, but really it’s not. It’s very simple. You don’t even have to save up for a deposit or first rental.
Here’s our easy guide on how to salary sacrifice an electric car.
Let’s start with how salary sacrifice works. First, you head over to our bespoke driver portal where you can choose the electric car that suits your lifestyle and fits your own personal budget. With that completed and the necessary paperwork finalised, you wait for your car to arrive.
Kriss Babb of the Media People found the whole experience easy and simple. Here’s what he had to say:
“I recently took delivery of my Mercedes EQA through salary sacrifice and Fleet Alliance. What a great experience! I was kept up to date weekly by the team and I also didn’t seem to wait as long as some have! 10/10 from me.”
So, once your electric car arrives it has everything you need to make your ownership period fully fuss-free and as simple as possible.
Included in the monthly amount you pay is road tax (VED), servicing and maintenance, replacement tyres should you need them, car insurance and an MOT if your agreement is more than three years. The only thing not provided is the electricity for you to enjoy electric driving.
There’s no initial payment as there would be if you were funding the electric car lease out of your taxed income. You simply pay monthly over a period that suits you, which can be 24, 36 or 48 months. The rental amount is taken from your gross monthly salary (the gross is the amount before any income tax or national insurance is deducted). Now this is where you save, because you only pay income tax and National Insurance on the reduced amount of salary.
Yes, there is a small downside. HMRC considers the car a benefit so there is tax to pay, but the amount is very low. Electric cars attract little benefit in kind tax and in the overall scheme of things you still make significant savings.
Remember that you are already paying less income tax and National Insurance on your salary. And, as we’ve said, the benefit in kind company car taxation on electric vehicles is incredibly low.
Here are two examples, based on the 2024/25 tax year which starts on 06 April.
The first is the MG4 which will cost you less than £10 a month (20% taxpayer) or less than £20 a month for a 40% tax payer.
The second is the Volvo XC40 Recharge Pure Electric. This will cost you under £18 a month (20% taxpayer) or under £35 a month if you’re in the higher earner bracket.
There is no catch. Salary sacrifice for electric cars is as simple and straightforward as that, which is what makes it such an outstanding opportunity to drive a new electric car.
“The scheme has been really easy to use. There was loads of choice.” comments Hannah O’Shea from Optivet Referrals, who has taken delivery of an MG 4.
Yes, salary sacrifice is cheaper and simpler than leasing an electric car personally. It’s important to remember the complete peace of mind motoring that you get with the Fleet Alliance salary sacrifice package. Everything is included (except the electricity!) so your motoring costs are fully budgeted.
So if you are assessing prices make sure you are looking at a comparable cost – include the maintenance and the car insurance and not just the base lease price when you are doing your homework.
The other important aspect to remember is that salary sacrifice does not impact your personal credit line and you have no initial payment rental to save up for – so that’s another advantage of salary sacrifice.
We’ll take that MG4 as an example based on a 20% rate tax payer. This is how the costs break down:
To demonstrate the saving, if you were to lease the car personally out of your take home pay it would cost £437 a month, plus you would still have to source and pay for fully comprehensive insurance (includes servicing and replacement tyres).
Over the three years of the agreement, electric car salary sacrifice could save you over £6,100.
Taking a 40% tax payer and the Volvo XC40 Recharge Pure Electric, there are similar savings to be enjoyed.
To amplify the saving, if you were to lease the car personally from your take home pay, it would cost £1,000 a month, plus you would still have to source and pay for fully comprehensive insurance (includes servicing and replacement tyres).
Over the three years of the agreement, electric car salary sacrifice would save you £21,000.
Salary sacrifice: it really is the easy way to drive a brand-new electric car.
“We were looking to replace our car when the company announced the salary sacrifice scheme, so it was great timing.
“The Fleet Alliance website had all the information we needed to know, along with a large selection of vehicles to choose from. It detailed all the costs and what was included in the agreement, such as insurance and servicing, so it made the choice straightforward based on the budget we had in mind.
“Communication with our agent was good and the agreement was prepared very quickly. We were regularly updated with the anticipated delivery date and the vehicle delivery service was very efficient. Overall it was a positive experience.”
Head over to our salary sacrifice car scheme page, where you can arrange to speak with one of our scheme experts. If you’re a driver with access to the scheme already you can view our latest electric car scheme offers and log in to customise your quote.
Note: agreement is based on a 36 month lease at 10,000 miles a year. Source: Fleet Alliance salary sacrifice calculator. Calculating an average insurance premium of £800.
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