The electric vehicle (EV) revolution is upon us, and businesses are increasingly looking for ways to embrace sustainability while offering attractive benefits to their employees.
Salary sacrifice schemes for electric vehicles present a win-win solution, allowing companies to contribute to a greener future and attract top talent with significant tax savings.
What is a Salary Sacrifice Scheme?
In a salary sacrifice scheme, employees agree to give up a portion of their pre-tax salary in exchange for a benefit. This reduces the employee’s taxable income, and therefore income tax and National Insurance (NI) contributions.
How Does it Work for Businesses?
As an employer, you partner with a salary sacrifice provider, like EZOO, who manages the entire process – from selecting cars to handling paperwork and maintenance. Here’s a breakdown of the benefits for businesses:
- Cost-Effective: There are no extra costs to the company to run the scheme and it is a cost neutral benefit. The employer incurs no additional outgoings, and the employee gets the best value for money. It’s a win-win situation.
- Attracts & Retains Talent: Employees are increasingly environmentally conscious. Offering an EV scheme demonstrates a commitment to sustainability and provides a valuable benefit that can attract and retain top talent.
- Added Value: With more and more businesses supporting the EV market, additional perks, apps and services can be added to amplify the original employee benefit.
- Boosts Employee Morale: When employees save money and contribute to a greener future, it can significantly boost morale and productivity.
- Reduces Company Carbon Footprint: By encouraging employees to switch to EVs, your business will be adding a significant element to your internal ESG strategy as well as contributing to wider cleaner air and reduced carbon footprint goals.
Tax Advantages for Employees:
The biggest perk for employees lies in the tax savings. Here’s how it works:
- Reduced Taxable Income: The sacrificed salary amount covering the cost of the car, is deducted from the employee’s gross salary before tax is calculated. This in effect reduces the salary on which the employee pays income tax and NI so these contributions are also reduced.
- Lower Benefit-in-Kind (BiK) Tax: Electric vehicles currently have a very low BiK tax rate (2% from 2022 to 2025), compared to petrol or diesel cars (which can be as high as 37%). This further reduces the employee’s overall cost of driving the car.
Additional Employee Benefits:
Beyond tax savings, employees enjoy several other benefits:
- Brand New EVs: Salary sacrifice schemes often offer access to brand new, premium brand high-tech electric vehicles, which perhaps may not normally be accessible.
- All-Inclusive Package: The payment deducted from the employee salary is usually a subscription-based payment which includes the cost of the car, insurance, maintenance, road tax, and breakdown cover, simplifying car ownership.
- Fuel Savings: The cost of electricity is significantly lower than petrol or diesel, leading to substantial savings on fuel expenses.
Considerations for Businesses:
While salary sacrifice schemes offer numerous benefits, there are a few things to consider:
- Scheme Provider Selection: Choose a reputable provider with a good track record and a wide range of EV options.
- Employee Eligibility: Clearly define employee eligibility criteria based on salary level or job role.
- Contract Length: Consider the length of the lease term (typically 2-4 years) to ensure it aligns with employee needs.
- Early Termination: Establish a clear policy for early termination of the lease to manage potential costs.
Considerations for Employees:
Employees should also be aware of the following:
- Reduced Take-Home Pay: The sacrificed salary portion will reduce the employee’s net monthly pay.
- Mileage Restrictions: Some schemes may have mileage restrictions, so ensure it fits your driving needs.
- Charging Infrastructure: Consider your access to home or workplace charging points before opting for an EV.
Salary Sacrifice From EZOO: Helping to accelerate sustainable driving.
We believe that salary sacrifice schemes for electric vehicles are a powerful tool for businesses to promote sustainability and attract top talent. With significant tax advantages for both employers and employees, and as the EV market continues to evolve, salary sacrifice schemes are poised to play a key role in accelerating the transition to electric vehicles in the UK, which is what we at EZOO fully support.
Our scheme therefore aims to make the adoption of salary sacrifice for businesses as simple and smooth as possible, helping you to deliver the best scheme for your employees.
Firstly, we manage the entire programme on your behalf; initially helping you through any initial administration and ensuring HMRC compliance and thereafter allowing you to focus on other employee business.
There are also no long-term contracts, in fact we are the only in house UK company to offer 12-month subscriptions through salary sacrifice. We also reduce your risk of being left with cars if your employee leaves.
Our market leading protection means that we will simply take the car back after just 2 months after delivery.
If you are providing a car scheme then you will likely want to provide adequate charging facilities onsite. We work with reputable partners who will guide you through the best options for maximising space and charging points.
Finally, we will help you launch the scheme to your workforce. As part of the experience of being in the EZOO family, launch days help employees find out more about the scheme, the tax benefits and savings and provide them with test drive opportunities in some of the best EV’s on the market.
For more information and FAQs on our salary sacrifice scheme get in touch with our team today to find out more.