Answers · UK 2025/26
How does salary sacrifice for electric cars work in 2026?
Through salary sacrifice, you give up part of your pre-tax salary to lease an electric car, reducing your income tax and NI. The company car BIK rate for fully electric cars is just 3% in 2026/27, making the tax on the benefit very low. For a higher-rate taxpayer, this can save 40% income tax plus NI versus paying from net salary.
Full answer
A salary sacrifice electric vehicle (EV) scheme lets you lease an electric car through your employer by giving up a portion of your gross (pre-tax) salary equal to the lease cost. This reduces your taxable income, saving Income Tax and employee National Insurance on the sacrificed amount. In return, you pay Benefit in Kind (BIK) tax on the company car. For fully electric cars in 2026/27, the BIK rate is just 3% of the car's P11D value. Example: a £40,000 electric car has a BIK of 3% × £40,000 = £1,200. A higher-rate taxpayer pays 40% × £1,200 = £480 in BIK tax per year. Compare this to leasing the car personally from net pay, where you save no Income Tax or NI on the payments. The savings are greatest for higher-rate and additional-rate taxpayers. Note: salary sacrifice reduces your gross pay, which can affect pension contributions (if contribution is a % of salary), mortgage affordability assessments, and your ability to claim certain benefits — check these implications before joining a scheme.
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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.