Salary sacrifice EV scheme UK: the complete guide.

A salary sacrifice EV scheme is the most tax-efficient way for a UK employee to drive a new electric car. The maths is genuinely straightforward — gross deduction before income tax and National Insurance, plus a 3% Benefit-in-Kind rate on fully electric vehicles for 2025/26. The result is typically 30–42% off the post-tax cost of leasing the same car privately. This guide covers exactly how it works, what you can and can't include, who qualifies, what the employer gets out of it, and the practical realities most employees only discover after they've signed.

What is salary sacrifice for EVs?

Salary sacrifice is a long-established HMRC-recognised arrangement where an employee gives up a portion of their contractual gross salary in exchange for a non-cash benefit — most commonly a pension contribution, a cycle, or in this case a fully electric vehicle. The employer provides the benefit and reduces the employee's gross pay by an agreed monthly amount. Income tax and National Insurance are calculated on the reduced salary, not the original.

For an electric vehicle, the structure is that the employer (or the scheme provider on the employer's behalf) leases the car from a leasing company. The employee uses the car personally and for business, pays a fixed monthly cost via gross salary deduction, and the employer takes care of the contract administration. The vehicle itself remains the leasing company's asset — the employee never owns it.

The reason EV salary sacrifice has grown so quickly in the UK since the early 2020s is the combination of two things: the gross-deduction tax efficiency that has always applied to salary sacrifice, and the ultra-low BIK rate that now applies to fully electric company cars. Together they produce a take-home cost most UK employees cannot get any other way.

How the tax saving works

Three tax mechanisms drive the saving:

Income tax saving on the gross deduction. The employee pays income tax at their marginal rate (20%, 40% or 45%) on the salary they actually receive. By sacrificing £500 per month, that £500 is no longer in their taxable pay — saving them £100, £200 or £225 in income tax respectively per month.

National Insurance saving on the gross deduction. Employees pay 8% National Insurance on earnings between the primary threshold and the upper earnings limit, and 2% above. Salary sacrifice removes the deduction from NI-able pay, saving 8% (or 2%) on the sacrificed amount.

Benefit-in-Kind tax on the vehicle. The car is now a company benefit, so HMRC charges BIK income tax on its taxable value. For a fully electric car in 2025/26 the BIK rate is just 3% of the P11D value — a fraction of what would apply to the equivalent ICE vehicle. The detail of how that calculation works sits in our guide to electric company car BIK rates.

The net effect for a typical higher-rate-taxpayer driver sacrificing £500 per month for a £40,000 EV: roughly £210 of tax and NI saving, with around £35 of BIK income tax owed back, leaving an effective monthly cost of around £290. The same package as a private personal lease would cost the full £500 in post-tax income.

What you can sacrifice

The scope of an EV salary sacrifice scheme has expanded significantly since the early arrangements that covered just the car. Modern schemes — including Perx — bundle additional EV-related items into the same gross-deduction agreement.

The vehicle. A fully electric car (BEV). The cleanest tax case applies to fully electric — plug-in hybrids attract higher BIK rates and are typically excluded from EV-specific salary sacrifice schemes. New and pre-loved vehicles are both available.

Home charger. A 7kW or 22kW home charger installation, including the unit, electrician fees and connection. Including the charger in the sacrifice means the cost is gross-deducted alongside the vehicle, producing the same income tax and NI saving.

Solar panels. A residential solar PV installation. Where the employer's scheme supports it, solar panels can be sacrificed as part of the same agreement — making the at-home electricity cost of charging the EV close to zero on sunny days.

Battery storage. Home battery storage to capture solar generation or off-peak grid electricity for later use. The combination of solar generation, battery storage and EV charging is the tightest closed-loop option for minimising at-home charging cost.

This bundle is the structural differentiator of our Perx salary sacrifice EV scheme: most providers offer the car alone; Perx bundles the car, the charger, the solar and the battery into one gross-deduction agreement.

Eligibility

Salary sacrifice schemes are voluntary arrangements between employer and employee — they require the employer to have set up an agreement with a scheme provider. From the employee's side, the typical eligibility criteria are:

Employment status: permanent employee, past the probationary period. Contract and zero-hours staff are usually excluded because the contract length is incompatible with a 2–5 year vehicle term.
Length of service: commonly 6–12 months, though some employers waive this.
Salary floor: the gross sacrifice cannot reduce take-home pay below the National Minimum Wage. This sets a practical lower bound on participation for lower-earning employees.
Manager / HR approval: some employers require sign-off on the specific package and term.

For the employer, the requirements are administrative rather than financial. A salary sacrifice agreement clause in the employment contract (or a side-letter), payroll integration to apply the gross deduction, and a scheme provider that handles vehicle sourcing, contracts and end-of-life return. There is no upfront capital cost to the employer.

BIK for EVs: 3% in 2026/27

The Benefit-in-Kind tax rate on fully electric company cars is the single most important variable in EV salary sacrifice maths. The announced trajectory is:

2025/26: 3%
2026/27: 4%
2027/28: 5%

The rate rises by 1% per year through the late 2020s and is widely expected to continue at that gradient. Even at 5%, EV BIK is dramatically lower than ICE BIK — the comparable diesel sits at 25–37%. The gap is the structural reason EV salary sacrifice has displaced traditional company-car arrangements for most UK employees.

For a salary sacrifice contract signed in 2026, the BIK rate that applies across the contract is calculated year-by-year against the prevailing rate. A 3-year contract starting now spans 2025/26 (3%), 2026/27 (4%) and 2027/28 (5%) — the saving narrows slightly each year but stays meaningfully advantaged throughout.

New vs pre-loved vehicles

Most salary sacrifice schemes have historically been new-car-only, on the basis that the leasing company's residual value risk is easier to manage on a new vehicle. The market has matured. Pre-loved (used) vehicles are increasingly available on salary sacrifice — typically 1–3 year-old EVs coming off their first lease, at materially lower P11D values.

The pre-loved option appeals to two cohorts: employees on lower salaries who would not otherwise be able to afford the gross sacrifice on a new £40,000 EV, and employees prioritising sustainability over latest-spec features (a 2-year-old EV has the same operational profile as a new one in most respects, at a substantially lower cost).

2, 3, 4 and 5-year terms explained

Salary sacrifice contracts typically run on 2, 3, 4 or 5-year terms. Choice of term is the second-biggest cost variable after vehicle choice itself.

2-year terms are the most expensive per month — the leasing company recovers the depreciation across fewer months — but offer maximum flexibility. Suitable for employees with uncertain career or location plans.
3-year terms are the most common balance of cost and flexibility, matching the typical contract length in the UK fleet market.
4-year terms reduce monthly cost by a further 10–15% against 3-year, at the cost of being further committed to the same vehicle.
5-year terms are the cheapest per month and the longest commitment. Suited to employees confident in their employment and lifestyle stability across the term.

Mileage allowance is set per term — typically 8,000 to 25,000 miles per year — with excess-mileage charges if exceeded.

Employer benefits

The employer's case for offering EV salary sacrifice rests on three pillars.

National Insurance saving. The employer pays Class 1 secondary NI (currently 13.8%, with announced changes through the rest of the decade) on cash pay. The salary sacrifice removes the deduction from NI-able pay, so the employer saves 13.8% on the sacrificed amount per employee per month — typically £600–£900 per employee per year.

Staff retention and recruitment. A well-run salary sacrifice EV scheme is one of the most-valued benefits in UK employment surveys. Employees who take the benefit develop friction-cost reasons not to leave (the vehicle, the charger, the contract). For employers competing for talent, the scheme is a low-cost way of differentiating the package.

ESG and Scope 3 emissions reduction. A scheme that converts employee personal vehicles to fully electric reduces the employer's reportable Scope 3 emissions, which increasingly matter for SECR reporting and supply-chain procurement requirements.

Common myths

Two persistent misconceptions are worth addressing directly.

"Salary sacrifice is just for high earners." This was true in earlier cycles when ICE BIK rates made sacrifice marginal for basic-rate taxpayers. With EV BIK at 3%, the maths now works clearly for basic-rate taxpayers too. A 20% rate taxpayer sacrificing £500 per month sees ~£160 of monthly saving — proportionally similar to the higher-rate saving.

"You need to work for a big company." Not true. Schemes are now widely available to small businesses — see our guide to salary sacrifice EV for small business. A 10-person company can run the same scheme as a FTSE 100, and the per-employee NI saving is identical.

How Perx works

Perx is the salary sacrifice EV scheme operated by Covase, the parent of Orbis IO. The scheme is designed to remove the friction that has historically made salary sacrifice complicated to launch for smaller employers and confusing for employees.

From the employee side: 8,000+ vehicles available across new and pre-loved EVs; home charger included by default; solar panels and battery storage as optional add-ons inside the same gross-deduction agreement; 2, 3, 4 and 5-year terms; insurance, maintenance, breakdown cover and roadside assistance bundled into the monthly cost.

From the employer side: no upfront capital cost; payroll integration handled by the scheme; no fleet platform commitment required (though where the employer is an Orbis fleet customer, the vehicles connect to the fleet intelligence platform from day one for live efficiency and SECR data); pricing scales by scheme size with no per-employee setup fees.

For employers running a wider fleet, Perx sits alongside the rest of the Orbis platform — see fleet intelligence software pricing for the full module breakdown — and the data layer behind the salary-sacrifice cars feeds the same SECR carbon reporting as the company-owned fleet, including alongside the broader EV transition planning for the wider fleet.

Frequently asked questions

What is an EV salary sacrifice scheme?

An EV salary sacrifice scheme is an arrangement where an employee gives up part of their gross salary in exchange for a fully electric vehicle (and optionally a home charger, solar panels and battery storage). The deduction happens before income tax and National Insurance are calculated, so the employee pays less of both. For 2025/26 the BIK rate on a fully electric company car is just 3%, which makes the combined tax efficiency materially larger than for any equivalent ICE vehicle. Schemes run on 2, 3, 4 or 5-year terms with a single fixed monthly cost covering vehicle, insurance, maintenance, breakdown cover and roadside assistance.

How much can I save with salary sacrifice on an EV?

Typical savings for a UK employee are 30–42% against the equivalent post-tax cost of leasing the same vehicle privately. A higher-rate (40%) taxpayer sacrificing £500 per month sees roughly £210 of tax and NI saving, bringing the effective cost to around £290. A basic-rate (20%) taxpayer sees roughly £160 of saving on the same package, around £340 effective. The exact figures depend on the vehicle's P11D value, the salary band, and how much of the bundle (charger, solar, battery) is included.

Do I need good credit to use salary sacrifice?

Salary sacrifice schemes are typically structured so that the employer holds the contract with the leasing company, not the employee. This means employees are not personally credit-checked the way they would be for a personal lease. Eligibility is generally tied to length of service (commonly 6–12 months), employment status (permanent, not contract or probation), and salary above the National Minimum Wage threshold after the deduction. Specific eligibility varies by scheme and employer.

Can my employer offer salary sacrifice without being an Orbis fleet customer?

Yes. Perx — the Orbis IO salary sacrifice scheme — is offered by Covase, the parent of Orbis IO, and runs as a standalone employee benefit independently of whether the employer uses the Orbis fleet platform. Many employers offer Perx purely as a staff benefit with no fleet commitment. Where the employer is also an Orbis fleet customer, the vehicles can be connected to the fleet intelligence platform from day one — but that integration is optional, not a precondition for offering Perx.

What happens at the end of my salary sacrifice contract?

At the end of the term, the employee returns the vehicle to the leasing company and either takes a new vehicle on a fresh sacrifice agreement or simply ends the arrangement. There is no obligation to buy or to renew. The vehicle is the leasing company's asset throughout — the employee never owns it. Mileage limits and end-of-contract condition standards apply, similar to any other lease arrangement.