When searching for information on salary sacrifice electric car schemes, you might have noticed that there aren't many real-world examples online showing the cost breakdown of salary sacrifice car schemes – but there are many articles claiming how much money you can save.
That means you might be left with some of the following questions:
- Does my tax bracket qualify me for better savings?
- How much does the salary sacrifice EV scheme save me?
- How does the salary sacrifice scheme cost compare to other methods of getting an EV?
- Can I see an explanation of the numbers behind these savings calculations?
Often, the numbers vary because salary sacrifice providers offer different packages. The premise might be the same but the figures might work out differently.
In this article, we aim to answer your questions and show you several examples to give you a better idea of how the scheme works.
We will show different salary sacrifice electric car examples to break down the numbers involved so you can better understand real-world situations. We’ll be covering:
- Someone in the lower tax bracket
- Someone in the higher tax bracket
- Standard leasing vs salary sacrifice prices
- Combustion vs electric vehicles (EV)
- Prices of different salary sacrifice providers
- What you need to know about salary sacrifice schemes
- Example of a salary sacrifice scheme order form
Note: If you’re looking for a low-risk way to get started with a salary sacrifice scheme and have someone help you through the whole process, then sign up to loveelectric for free.
Salary sacrifice car scheme examples: a list
At loveelectric, we’re specialists in setting up electric car salary sacrifice schemes. We work as a broker, allowing us to get the best rates on the market, and we’re also a full-service provider, which means we help you set up the scheme, answer employees’ questions and take care of payroll and all the admin required.
You can learn more about our story here: Electric Cars are Expensive. Here’s How We’re Democratising Electric Vehicle Access At loveelectric
In the following section, we take a look at some of the most important aspects when considering a salary sacrifice scheme including:
- Demonstrating two different scenarios based on salary and the corresponding tax bracket.
- Comparing PCP deals with salary sacrifice.
- Taking a look at the best salary sacrifice providers out there
Example 1: A person with a £40k salary - Fiat 500 [20% tax bracket]
Let’s do an example for an employee called Simon on a £40,000/year salary, which would put him in the 20% tax bracket. He’s using a typical lease example of 48 months and 5,000 annual miles for the popular all-electric Fiat 500.
Below you can see the before and after of what this saving will look like on Simon’s payslip, demonstrating clearly where the savings come from. The example is from a salary sacrifice scheme with loveelectric.
Simon’s electric car lease quote from loveelectric is (gross sacrifice amount) £366 per month.
With the salary sacrifice scheme, the net cost to Simon is £255 per month
The difference in net pay is £255, which is effectively the price that Simon will pay to lease a brand new electric car. In his case, he’s received a 30% discount on the standard lease price.
Here’s what the numbers look like on his payslip:
Simon’s Old Payslip
Simon’s New Payslip
Although the lease costs £366 per month, he’ll only see a net cost of £255 from his salary since the lease is paid before tax.
Example 2: A person with a £100k salary - Fiat 500 [40% tax bracket]
For this example, we’ll pick another employee called Jenifer and see what her payslip calculations look like for the same vehicle but on a £100,000/year salary. This puts her in the higher 40% tax bracket.
Again, Jenifer has a typical lease example of 48 months and 5000 annual miles for the electric Fiat 500.
The quote Jenifer got on the loveelectric site for the standard lease price (gross sacrifice amount) is also £366 per month.
But through tax savings, the net cost to Jenifer is £217 per month. Because of her higher salary, she’s saving up to 40% on the standard lease price.
Below you’ll find an example of Jenifer's payslip before and after taking on a Fiat 500 salary sacrifice scheme with loveelectric.
Jenifer Old Payslip
Jenifer New Payslip
Looking at the table below, you get a clearer picture of the overall savings. The table shows how the 40% tax bracket benefits from even more savings than the 20% tax bracket, with £1,824 saved throughout the 48-month lease.
We can clearly see that employees in the 40% tax bracket are paying more tax and are therefore saving more compared to those in the 20% tax bracket.
Prices correct at time of publication. Specific prices may fluctuate due to manufacturers' pricing, but the calculation in savings will remain the same.
If you're curious as to how the figures of £366 and £217 were calculated, we've included an infographic below outlining the breakdown of all the costs involved for somebody in the 40% tax bracket.
Comparing PCP vs salary sacrifice (with an example)
A PCP (personal contract purchase) is one of the most common ways to get an electric car, so it makes sense to compare it with a salary sacrifice scheme.
People like PCPs as they are cheaper than taking out a loan to buy a car outright. It also offers flexibility in the way you have different options at the end of your contract, including buying the car or trading it in.
There are a few things to note when comparing PCP to salary sacrifice. The first is that maintenance and insurance are not included in a PCP. Also, if you go down the PCP route, be prepared to pay the upfront cost of a deposit.
With a PCP, you make monthly instalments like a salary sacrifice scheme. In the table below, we’ll look at how the two compete with each other for the same car model, a Vauxhall Corsa E.
The table above shows how it works out significantly cheaper to use a car via the salary sacrifice scheme than with PCP.
The figures for insurance will vary depending on the driver's age, postcode and salary. The figures for maintenance are based on averages and may also differ from case to case. But in general, a salary sacrifice scheme works out cheaper.
You can read this in more detail here: Electric Car Monthly Cost: How Much Does it Cost to Run an Electric Car?
Comparing combustion car vs electric car (with an example)
Perhaps you like a particular car brand and want to see how it differs from electric to combustion – or you’re still unsure if you’d like to go with combustion or electric.
In that case, let’s compare a combustion car with an electric vehicle on a salary sacrifice scheme to get the complete picture of cost savings.
Below you can see how a salary sacrifice Vauxhall Corsa E with loveelectric and the combustion version of a new Vauxhall Corsa compare to one another.
You can see from the example above that the salary sacrifice scheme with loveelectric works out cheaper with a total saving of £4,032.6 for the entire lease.
Example of the fuel cost difference between a combustion car and an electric car
In general electric cars are cheaper to run than their petrol counterparts. An example calculated via nextgreencar using the same Vauxhall Corsa model with 5000 annual miles shows the price of a petrol Corsa at £721 per year and the electric Corsa-e at £473 per year.
That's a 50% saving in your yearly vehicle fuel cost.
Comparing different salary sacrifice scheme providers
At loveelectric, we're specialists in the electric car salary sacrifice market. But we also understand that we might not be a good fit for everyone, which is why we've put this comparison table comparing each provider on the market.
For a comprehensive breakdown of how these providers compare against each other read this article: Best salary sacrifice car scheme in the UK.
What you need to know about salary sacrifice schemes
When it comes to tax and salary sacrifice schemes, there are a few key things to keep in mind.
How the HMRC views salary sacrifice schemes
The government has made it very clear that it wants to discontinue combustion cars in the near future. In fact, the sale of combustion cars will not be allowed in the UK after 2030. As HMRC is a branch of the government, it has adopted some of its systems to promote more electric vehicle use. Most notably: the salary sacrifice scheme.
With this scheme, employees can sacrifice a part of their gross salary in exchange for lease on an electric vehicle. This can translate into a decent amount of savings – which differs depending on your tax bracket. To find your pay tax bracket visit the HMRC website.
The main terms you will need to know about with your salary sacrifice scheme are:
- Benefit in kind tax (BIK)
- Income tax
- National insurance contributions (NIC)
- Value added tax (VAT)
- Road tax
Learn more in this blog: Electric Vehicle Salary Sacrifice: All Your Questions Answered (With Examples)
How salary sacrifice affects your benefit in kind tax (BIK)
Benefit in kind tax is the tax you must pay if you get employee benefits from your employer. It can be pretty high if you get a combustion-engined vehicle, up to 40% of the P11D value of the car. This is because, for vehicles, the tax is based on CO2 emissions.
However, with the salary sacrifice scheme, electric cars only have a benefit in kind tax of 2%. To encourage more electric vehicles to be used as benefits, the government has put a 2% limit on BIK rates until 2025.
What could cost you upwards of £2k a year with a combustion car, can now be around £500 per year with an electric one.
How salary sacrifice affects your national insurance contributions (NIC)
You’re probably aware that NIC is used to pay for certain benefits you get while living in the UK, such as a pension, healthcare and social care.
With an electric car salary sacrifice scheme, you forgo some of your salary for a brand-new car. This means you will earn less over the year, and hence you’ll have less in NIC to pay.
How salary sacrifice affects your income tax
Seeing that you will be earning less over the year, your income tax will be affected in the same way as your NIC - you'll be paying less.
You pay for the car out of your gross income, so you will end up paying less tax, and all of these tax reductions are HMRC approved.
Other charges to note
With electric vehicles, there is no road tax or congestion charges. As the employer is the one who takes out the lease, the employee will not pay any VAT. It’s not all bad for the employer though, as they can even claim 10% of this VAT back.
With most salary sacrifice schemes, you do not have to pay an upfront deposit compared to buying one.
Example of a driver order form with loveelectric
By now, you should have a better understanding of the pricing involved in a salary sacrifice scheme. As the last example, we’ll now look at what a typical driver order form looks like with loveelectric.
The process looks like the following:
- If you’re interested in signing up loveelectric, send an enquiry and we’ll set you up.
- If you’re an employee, we’ll talk with your employer. As an employer, we’ll request some documents and you’ll need to complete credit checks with our partner car leasing companies.
- Sign a service agreement if you choose to continue (no cost yet).
- Get access to the live web application with real-time prices based on your insurance details and place your electric vehicle order.
- Employee picks the car (employer must agree) and receives the order form.
- Employees only start paying once the car arrives.
The order form will show you a recap of what you have ordered; like the make and model of the car, any extras and what protection you get.
We do not perform a credit check on employees, but for the insurance, we will require the driver's age, postcode and annual salary. You should check to ensure all the details are correct and notify the team of any discrepancies.
As an employee, you will see an overview of what’s included in your lease:
- How many miles per annum
- Lease term
- Maintenance & servicing
- Breakdown cover
- Early termination protection
- Fully comprehensive insurance: (Optional)
Like the payslip example below, you’ll also get a clear breakdown of all the costs and how much you are saving through tax reductions.
The order form also serves as a legal document for the driver, as you must agree to the terms and conditions laid out and sign it. Next, you’ll see a list of declarations followed by an eligibility section. A snapshot of this can be seen below.
FAQ with salary sacrifice schemes
Hopefully, the above salary sacrifice car scheme examples have cleared up many of your queries. We’ve added a list of frequently asked questions that we hear a lot from our customers to explain further why we think salary sacrifice is so beneficial.
Are salary sacrifice electric car schemes worth it?
Yes, getting a brand-new electric car for small monthly payments with fully comprehensive insurance is worth it.
As seen in the payslip examples above, it is especially worth considering if you’re in the higher tax bracket. Check out this tax and financial benefits article for a more in-depth look.
You don’t pay any big deposit and you’ll pay less in NIC and income tax. You get everything you need in your monthly price, including insurance, maintenance, tyre replacements and servicing.
How much does EV salary sacrifice save?
You can save anywhere from 30 - 60% of the cost of a standard lease. You have the added benefit of monthly savings on the cost of fuel compared to a combustion car.
In this article, we have shown real-world examples of these savings.
Is salary sacrifice a better option than buying a car?
We believe it’s far better to salary sacrifice over buying an electric car. You'll typically have far higher monthly payments when buying a car through the three most common methods (PCP, Hire Purchase or bank loan). You’ll also miss out on the tax savings.
With a salary sacrifice scheme, you’ll have far more flexibility to upgrade to a brand new electric car every few years. With the rate at which technology for electric vehicles is increasing, it’s better to always have the most up-to-date version rather than being stuck with an old model you bought.
You’ll eventually have to sell that electric car if you buy it, which is already a headache in itself. Also, you’ll be dealing with the hassle of selling into an already further evolved marketplace. Most people won’t want to buy old technology.
With salary sacrifice, there is very little work to do. All your maintenance, servicing and insurance are already taken care of. At the end of your lease, you can seamlessly just lease again for a newer model with up-to-date batteries and a longer range.
Can you own the car through salary sacrifice?
No, with salary sacrifice you are leasing a car, not owning it, just like any other lease.
Some salary sacrifice providers will allow you to buy the car after your lease contract is over, but they won’t share the price until later on in your contract.
At loveelectric, you’ll lease the car and we don’t offer the option to purchase the vehicle. As we mentioned above, buying an electric car doesn’t always make sense since the technology is developing so rapidly.
If you’re deciding on whether to lease or buy your car, check out our article on leasing vs buying.
Which is the best EV salary sacrifice scheme in the UK?
loveelectric stands out among the leading companies providing salary sacrifice schemes for its cost transparency, no hidden fees and fantastic support throughout the leasing process.
To decide for yourself, check out this article on the best salary sacrifice car scheme in the UK.
What are things to consider with salary sacrifice?
You will earn less over the year by taking the cost out of your gross salary. A lower salary could mean that you have less borrowing potential, which can be based on a multiple of your take-home pay. It’s worth considering this if you plan to take out a loan via a lender while leasing on salary sacrifice.
It’s also worth noting that not all salary sacrifice schemes are the same. In some cases, they have very different cost structures, hidden fees or poor customer service. Be sure to check out online reviews on sites such as Trustpilot.
Salary sacrifice schemes enable worry-free motoring
As an employee, you get a brand new electric car at a very low price. The package with loveelectric includes all the paperwork, insurance and support you need. You save even more money if you’re in the higher tax bracket.
As an employer, you get a risk-free way of deploying an excellent company benefits package that will help with company morale and staff retention. It’s also a way to help with your ESG targets if you’re looking to reduce your carbon footprint and are environmentally inclined.
For most people, the savings sound too good to be true until they see the cost breakdown in their payslips. We hope this article did the same for you. Send us an enquiry if you’re interested to learn more and would like to sign up with loveelectric.
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