As the market for second-hand electric cars grows, employers are more likely to offer salary sacrifice plans in anticipation of the 2030 petrol/diesel cutoff date. This is according to Thom Groot
Businesses are increasingly looking at ways to transition to electric vehicles after the new UK government pledged to reinstate the ban on petrol and diesel cars by 2030.
Businesses are working harder than ever to reduce their three-dimensional emissions, such as the emissions produced by their employees driving to work.
In recent years, salary sacrifice has proven to be the most cost-effective solution.
Employees can save up to 60% by purchasing electric vehicles through pre-tax salary arrangements.
How do they work and why are these devices so popular?
Salary sacrifices are relatively simple. Employees agree to forgo a portion their gross salary in order to lease an electric vehicle from their employer. The employee’s taxable earnings are reduced because the payments come from their pre-tax income.
Savings are based on the tax bracket of an employee. Those with higher incomes will typically save more. This can save employees up to 60% of the cost of an electric vehicle. Salary sacrifice is a great option for employees who want to drive an environmentally friendly car at a reasonable cost.
The cost of an electric vehicle is important, as research by The Electric Car Scheme Affording Sustainability Report shows that 68% of UK residents find affordability the main barrier to buying an EV.
The upfront cost or monthly price is far less than other concerns.
The low tax rate on benefits-in-kind, or BIK, for electric vehicles is another key factor in the success. BIK tax is paid on benefits that are not cash-based, like company cars. BIK is only 2% for electric cars. The low rate makes it possible to lease an electric car through salary sacrifice at a very competitive price.
Employees who are looking for a solution that will last a long time can be assured of significant savings in the future.
The UK government has also committed to maintain low BIK rates at least until 2028. This makes the deal even more attractive. Experts predict that, as the 2030 ban on petrol and diesel vehicles looms, BIK rates for electric cars will be low until 2035, to encourage widespread adoption of EVs.
Employees who are looking for a solution that will last a long time can be assured of continuing to save money.
Recent changes to the scheme have changed the rules, or at the very least, the math. Salary sacrifice schemes used to be limited to brand new electric cars. Now, The Electric Car Scheme and others offer the option to lease second hand electric cars. This allows for even greater savings. Employees can save up to 50% on a second hand EV compared to leasing a brand new vehicle.
Second-hand vehicles can save you anywhere from 30 to 75%.
As can be seen, buying a used car will result in significant savings. It is a great benefit for those who want to buy an EV of any type, but it also opens up the scheme to a wider audience. This means that even those with lower salaries or junior employees can now access the scheme.
The benefit is no longer a privilege for only the highest earners in a company, but one that appeals to all.
Employees and HR managers may be concerned about the financial risks of a salary-sacrifice scheme. What happens to their lease if circumstances change, such as job loss or being redundancy?
The Electric Car Scheme, a BCorp-certified business, offers a complete protection against risk. The Electric Car Scheme (a BCorp certified business) offers complete risk protection. This safety net allows everyone to enter the scheme in confidence.
Employer interest in electric car schemes is incredibly high. 83% of employers are planning to launch one by 2024 or 2025. The thousands of companies that offer an electric car scheme are seeing increased awareness and urgency, making it more and more appealing to their employees.
Salary sacrifices are a great way to save money and enjoy the benefits. The deadline of 2030 is fast approaching. In 2025, salary sacrifice will likely go from being a nice to have perk to a necessity for every business to remain competitive.
Subscribe to our weekly HR news and guidance
Every Wednesday, receive the Personnel Today Direct newsletter.
Personnel Today has the latest HR job openings.
Browse Human Resources Jobs
