The short answer: an electric car through salary sacrifice typically costs an employee between a fifth and a third less than the gross monthly figure, depending on their tax band. On our worked example, a car with a £500 a month gross sacrifice costs a basic-rate taxpayer about £387 a month and a higher-rate taxpayer about £343, once company car tax is included. This guide shows how those figures are worked out, how they change over the next few years, and the downsides you should understand before you sign.
How salary sacrifice saves money
With salary sacrifice, you agree to give up part of your gross salary in return for the use of a car. Because the sacrifice is taken before income tax and National Insurance are calculated, you pay less tax and NI on your pay. In return, you pay company car tax, called benefit in kind (BIK), on the car.
For petrol and diesel cars the BIK is high enough to wipe out most of the saving. For fully electric cars it is very low: 4% of the car's list price in the 2026/27 tax year. That is why salary sacrifice works so well for electric cars and so poorly for almost everything else.
The monthly sacrifice usually covers the lease, insurance, servicing, maintenance, tyres and breakdown cover. You pay for charging.
Worked example: the monthly cost by tax band
Illustrative only. Assumes an electric car with a list price (P11D value) of £40,000, a gross salary sacrifice of £500 a month, 2026/27 rates for England, Wales and Northern Ireland, and that your salary stays within the same tax band after the sacrifice.
Basic-rate taxpayer (20% tax, 8% NI). Tax and NI saved: £140. Net cost of the sacrifice: £360. Company car tax: about £26.67. Real monthly cost: about £387, a saving of about 23%.
Higher-rate taxpayer (40% tax, 2% NI). Tax and NI saved: £210. Net cost of the sacrifice: £290. Company car tax: about £53.33. Real monthly cost: about £343, a saving of about 31%.
Additional-rate taxpayer (45% tax, 2% NI). Tax and NI saved: £235. Net cost of the sacrifice: £265. Company car tax: £60. Real monthly cost: about £325, a saving of 35%.
The company car tax figure is the list price (£40,000) multiplied by the BIK rate (4%), giving a taxable benefit of £1,600 a year, which is then taxed at your marginal rate.
If you earn between £100,000 and £125,140, the saving can be larger still. In that band you lose part of your tax-free personal allowance, and reducing your salary through sacrifice can restore some of it. Ask your accountant to model this properly.
Scottish taxpayers pay different income tax rates, so the figures will differ.
How company car tax changes over the agreement
Most salary sacrifice agreements run for two to four years, so the BIK rate matters for the whole term, not just the first year. The rates for fully electric cars are already set. The Autumn Budget on 28 October 2026 added the 2030/31 rate.
Monthly company car tax on a £40,000 electric car:
2026/27 (4%): about £26.67 basic rate, £53.33 higher rate
2027/28 (5%): about £33.33 basic rate, £66.67 higher rate
2028/29 (7%): about £46.67 basic rate, £93.33 higher rate
2029/30 (9%): £60 basic rate, £120 higher rate
2030/31 (10%): about £66.67 basic rate, £133.33 higher rate
Even at 10%, an electric car is taxed far more lightly than a petrol or diesel car, where rates run up to 37% today. But a good quote should show you the cost in every year of the agreement, not only the first.
What changes the monthly cost
The car's list price. BIK is charged on the list price, so a more expensive car costs more in tax as well as in the lease.
Annual mileage. Higher mileage allowances increase the lease cost.
Term. Longer agreements usually lower the monthly cost but commit you for longer.
What is included. Check whether insurance, maintenance and breakdown cover are in the price before comparing quotes.
Charging. Charging at home is usually much cheaper than public charging. Budget for it separately.
Pay-per-mile road tax. From April 2028, electric cars will pay Electric Vehicle Excise Duty of 3p a mile. At 10,000 miles a year that is about £25 a month.
The downsides you should know first
Salary sacrifice is a good deal for many employees, but it is not right for everyone. These are the points most providers mention only briefly.
The minimum wage rule. A sacrifice cannot take your pay below the National Minimum Wage or National Living Wage. Lower-paid employees may not be eligible, or may be limited to cheaper cars. The National Living Wage rises to £13.21 an hour from 1 April 2027.
Salary-linked benefits. Your contractual salary is lower, so some benefits calculated on salary, such as certain pension contributions, life cover or overtime rates, may fall. Check how your employer's scheme handles this.
Statutory payments. Some statutory payments are based on average earnings, which a sacrifice can reduce. Plan ahead if you expect parental leave.
Mortgage applications. Some lenders look at your salary after the sacrifice. Check before applying for a mortgage.
Leaving your job. If you leave during the agreement, there may be an early termination charge. Good schemes include protection for common situations such as resignation or redundancy. Ask exactly what is covered.
You do not own the car. At the end of the agreement, the car goes back.
The employer's side
Employers save National Insurance too. In our example, the employer stops paying 15% employer NI on the £500 sacrificed, saving £75 a month. They pay Class 1A NI of 15% on the £1,600 benefit, about £20 a month. That leaves a net saving of about £55 a month per car, before any administration costs.
The Budget on 28 October 2026 left car salary sacrifice unchanged. The cap on National Insurance relief for salary-sacrificed pension contributions, due from April 2029, applies to pensions only, not cars. From 6 April 2027, employers must report company car benefits through payroll, which most salary sacrifice providers already support.
Our salary sacrifice page explains how Pinks sets up schemes for employers, including employer protection if an employee leaves.
Is it better than leasing an electric car personally?
For most taxpayers, yes, because the payments come from gross rather than net pay. A personal lease is paid from your take-home pay, with VAT included in the rentals. But personal leasing has no BIK, does not depend on your employer, and is not affected if you change jobs. Our electric vehicle leasing page covers both routes.
Frequently asked questions
How much can I save with salary sacrifice on an electric car?
Typically between about a fifth and a third of the gross monthly cost, depending on your tax band, once company car tax is included. Higher earners save more.
What is the BIK rate on electric cars?
4% in 2026/27, rising to 5% in 2027/28, 7% in 2028/29, 9% in 2029/30 and 10% in 2030/31.
Does salary sacrifice affect my pension?
It can. If your pension contributions are based on your salary after the sacrifice, they may fall slightly. Many employers base pension contributions on the pre-sacrifice salary. Check your scheme's rules.
What happens if I leave my job?
The agreement normally ends, and an early termination charge may apply unless your scheme covers it. Check the protection before you sign.
Do I pay for charging?
Yes, in most schemes. Some employers offer workplace charging. Home charging is normally the cheapest option.
Can any employee join?
Eligibility depends on the scheme. Employees on lower salaries may be limited by the minimum wage rule, and some schemes require a minimum length of service or a permanent contract.
Talk it through
If you are an employer thinking about a scheme, or an employee who wants to understand the numbers, speak to Pinks. For the wider picture on business vehicles, read our guide to business vehicle leasing and salary sacrifice or visit our vehicle leasing page.
Figures are illustrative only and based on 2026/27 rates for England, Wales and Northern Ireland. Your own figures will depend on your salary, tax code and the car you choose. This guide is general information, not tax advice; speak to your accountant or the scheme provider. Information correct as at November 2026.
