Answers · UK 2025/26
How does electric car salary sacrifice work in 2026/27?
Under EV salary sacrifice, your employer leases an electric car and you give up part of your gross salary to cover the cost. You save income tax and National Insurance on the sacrificed amount. The car attracts a 5% benefit-in-kind rate in 2026/27, making the effective cost significantly lower than a personal lease.
Full answer
**What is EV salary sacrifice?** EV salary sacrifice is an arrangement where your employer leases an electric vehicle and you agree to reduce your gross salary by the monthly lease cost. Because the sacrifice comes from pre-tax income, you pay less income tax and employee National Insurance (NI) — and your employer saves on secondary (employer) NI too. **The benefit-in-kind (BIK) element** Although you sacrifice salary, you still receive a car as a benefit in kind. For 2026/27, fully electric vehicles attract a BIK rate of 5% (up from 4% in 2025/26). This means you pay income tax on 5% of the car's list price. **Worked example: David, higher-rate taxpayer** David earns £60,000. He sacrifices £500/month (£6,000/year) for an electric car with a list price of £35,000. - Salary sacrifice tax saving: £6,000 × 40% (income tax) + £6,000 × 2% (employee NI above UEL) = £2,400 + £120 = £2,520/year - BIK charge: 5% × £35,000 = £1,750 × 40% income tax = £700/year - Net annual cost to David: £6,000 − £2,520 + £700 = **£4,180/year** (£348/month) - Compared to taking £6,000 net cost from take-home pay **Employer saving** The employer saves secondary NI at 15% on the sacrificed salary: 15% × £6,000 = £900/year. Many employers pass some of this saving to employees, further reducing the effective cost. **What's included?** Most salary sacrifice EV schemes include insurance, servicing, tyres, and breakdown cover in the monthly lease amount — making comparison with a personal lease straightforward. **Key considerations** - Your salary must not fall below National Minimum/Living Wage after sacrifice - If you leave the employer, the car arrangement typically ends - The scheme must be set up via a formal salary sacrifice agreement — a verbal arrangement is not sufficient - Scheme is available to all employees where the employer offers it; self-employed cannot use it **Is it worth it?** For basic and higher-rate taxpayers driving EVs, salary sacrifice typically produces savings of 30–50% compared to a personal lease of the same car. Use CalcHub's salary sacrifice calculator to model your specific figures.
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This answer is informational only and does not constitute financial, tax or legal advice. Figures are for the 2025/26 UK tax year. See our methodology and sources.