We asked Jonathan Watts-Lay, Director, WEALTH at work, about the perks of buying an electric car through salary sacrifice.
He comments; “Paying for an electric vehicle through a workplace salary sacrifice scheme can offer considerable tax benefits. Salary sacrifice electric car schemes typically enable employees to lease an electric car and pay for it monthly through pre-tax salary. This means employees pay less income tax and national insurance, making it one of the most cost-effective ways to drive an electric car. Leasing in this way gives higher rate tax payers a saving of 40% in income tax and 2% in National Insurance. Employees who pay tax at the basic rate can make a saving of 20% in income tax and 12% in National Insurance. Paying for a car through salary sacrifice will mean that it attracts a tax charge as a ‘benefit in kind’. The benefit in kind value applied to electric cars is currently 2%, meaning for many the income tax and National Insurance saving outweighs this relatively small ‘benefit in kind’ cost. This tax charge is also a fraction of the amount of tax drivers of petrol, diesel and hybrid cars pay, which can be up to 37%.