UK Electric Car Salary Sacrifice Calculator
An electric car through salary sacrifice comes out of your gross pay, so you save Income Tax and National Insurance — and an EV is taxed at just 2% Benefit-in-Kind for 2024/25. Enter your salary and the monthly lease to see what the car actually costs you after tax, and how much you save versus leasing from your net pay.
How the saving is built
Electric-car salary sacrifice stacks two separate tax advantages, which is why it's so much cheaper than a normal personal lease.
1. The lease comes out of pre-tax salary
You give up gross salary, so you never pay Income Tax or National Insurance on the money used for the car. A higher-rate taxpayer saves 42% (40% tax + 2% NI); a basic-rate taxpayer saves 28%; and someone in the £100,000–£125,140 trap saves an effective 62%. So the £600/month headline can cost far less in real take-home.
2. Electric cars are taxed at just 2%
Because the car is provided by your employer, it's a benefit-in-kind. But the BiK rate for a pure EV is only 2% of list price in 2024/25 — versus 20–37% for petrol and diesel. On a £45,000 car that's a taxable benefit of just £900, costing a higher-rate taxpayer £360 a year. That small charge is the only tax you pay back.
| Fuel type | Typical BiK rate 2024/25 |
|---|---|
| Pure electric | 2% |
| Plug-in hybrid (long EV range) | 8% |
| Plug-in hybrid (short EV range) | 12–14% |
| Petrol / diesel | 20–37% |
The BiK rate is rising — but slowly
The government has confirmed the electric-car BiK rate will climb gradually: 3% in 2025/26, 4% in 2026/27, and 5% in 2027/28. Even at 5%, an EV remains dramatically cheaper to run as a company/sacrifice car than any petrol equivalent. Use the dropdown above to see how a future rate changes your numbers — the BiK rate is usually fixed for the life of your lease based on the year you take the car.
Who benefits most
- Higher and additional-rate taxpayers — the more tax you'd otherwise pay, the more you save by sacrificing pre-tax.
- Anyone in the £100k–£125,140 trap — sacrificing salary here saves 62% and also helps restore your Personal Allowance.
- People who want a new car anyway — the scheme bundles insurance, servicing, tyres and breakdown, so it replaces those costs too.
Uses 2024/25 UK tax rules (rest-of-UK and Scottish Income Tax bands, Class 1 NI, 2% electric-car BiK). Figures are estimates — actual scheme costs vary by provider and include bundled services. Not financial advice. Check early-termination terms before committing, and confirm how sacrifice affects your pension with your employer.
Earning over £100k?
If your salary is between £100,000 and £125,140, salary sacrifice does double duty — it funds the car and helps claw back your Personal Allowance at a 62% effective rate. The £100k Trap calculator shows your full marginal-rate picture, and the £19 toolkit models sacrifice against bonus timing and SIPP top-ups on your numbers.
Frequently asked questions
What is electric car salary sacrifice?
Salary sacrifice lets you lease a brand-new electric car by giving up part of your gross salary, before Income Tax and National Insurance are deducted. Your employer runs the scheme (usually through a provider like Octopus, Tusker or LoveElectric), leases the car, and reduces your pay by the monthly cost. Because the money comes out pre-tax, a higher-rate taxpayer effectively gets ~42% off the lease cost — and the car attracts only a 2% Benefit-in-Kind tax charge in 2024/25.
Why is it so much cheaper than a normal lease?
Two reasons. First, the lease cost comes out of your gross (pre-tax) salary, so you save the Income Tax and National Insurance you'd otherwise pay on that money — 42% for a higher-rate taxpayer, up to 62% in the £100k–£125,140 band. Second, electric cars have an extremely low Benefit-in-Kind rate (2% for 2024/25) versus 20–37% for petrol/diesel. The combination means the true cost after tax is often 30–50% lower than a personal lease of the same car.
What is the Benefit-in-Kind (BiK) charge on an electric car?
Because you get the car through your employer, HMRC treats it as a taxable perk (benefit-in-kind). For a pure electric car the BiK rate is just 2% of the car's P11D value (list price) for 2024/25. You pay Income Tax on that small amount at your marginal rate. Example: a £45,000 EV has a BiK value of £900, costing a higher-rate taxpayer just £360 a year in tax. The rate rises gradually: 3% in 2025/26, 4% in 2026/27, 5% in 2027/28 — still very low.
What's the catch?
A few things to weigh: (1) Salary sacrifice reduces your gross pay, which can slightly lower mortgage affordability assessments, statutory maternity/paternity pay, and pension contributions if they're a percentage of salary. (2) You usually can't exit the lease early without penalty if you leave your job or are made redundant (though many schemes have early-termination protection). (3) Sacrifice can't take your pay below the National Minimum Wage. For most higher-rate taxpayers who want a new EV, though, the savings are substantial.
Does it affect my pension or other benefits?
It can. Because your gross salary is lower, anything calculated as a percentage of gross — like employer pension contributions or income-based benefits — may reduce slightly. Some employers base pension contributions on your pre-sacrifice ('notional') salary to avoid this. It's worth confirming with your payroll team. The reduced salary is also what lenders see, which can marginally affect borrowing capacity.
Is salary sacrifice available for petrol or diesel cars?
Technically yes, but it rarely makes sense. Petrol and diesel cars carry BiK rates of 20–37% (based on CO2 emissions), which wipes out most of the tax saving from sacrificing salary. The whole appeal of car salary sacrifice today rests on the 2% electric-car BiK rate. Plug-in hybrids sit in between (8–14% depending on electric range) and can occasionally work, but pure EVs are far and away the best value.
How does the £100k trap make EV sacrifice even better?
If your salary is between £100,000 and £125,140, your marginal tax rate is an effective 62% because of the tapered Personal Allowance. Every £1 you sacrifice for an EV therefore saves you 62p — so a £600/month lease can cost as little as ~£230/month net after the BiK charge. For high earners in the trap, EV salary sacrifice is one of the most tax-efficient perks available.
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