A salary sacrifice scheme can be a great perk for employees, and it can help employers attract new staff as well as retain existing staff. If you’re thinking about salary sacrifice schemes for your business, here’s everything you need to know about electric cars.
What is a salary sacrifice scheme?
A salary sacrifice scheme is an agreement between an employee and an employer, where the employee ‘sacrifices’ part of their salary in exchange for a non-cash benefit. This could be a bicycle through the government’s Cycle to Work scheme, pension contributions or a workplace nursery.
A salary sacrifice scheme provides an annual tax exemption, which allows employers to loan an electric car to employees as a tax-free benefit. This means that both employers and employees save money on tax, without the employer incurring any additional costs.
Salary sacrifice schemes have a number of positive effects for both employers and employees. Offering salary sacrifice schemes can attract new talent to your business by demonstrating a commitment to the happiness and satisfaction of your staff. For employees, a salary sacrifice scheme is a cost-effective and money saving way of funding expensive products and services.
The UK is going green, by going electric
The UK Government published the Electric Vehicle Infrastructure Strategy in 2022. This strategy outlined a number of plans to make the UK a greener country, including increasing the amount of public electric vehicle charging points, banning the sale of new petrol and diesel petrol vehicles by 2030, and all new cars and vans to be fully emission zero at the tailpipe by 2035.
Used electric and hybrid cars are widely available to purchase, but the range on these vehicles is typically much lower than the range on new electric vehicles. Electric car owners often reference something that has been termed ‘range anxiety’; this is where the charge in your car is running low, and you’re unsure where the next charging point will be. However, new electric vehicles can have ranges of over 300 miles, meaning ‘range anxiety’ is much less of a problem.
Why your business should opt in to an electric car salary sacrifice scheme
Purchasing a new electric vehicle still isn’t as affordable as purchasing a petrol or diesel vehicle, which is why an electric car salary sacrifice scheme can be incredibly attractive for employees. Through a salary sacrifice scheme, staff have the opportunity to lease or purchase an electric vehicle, which can drastically reduce the costs.
Once employees have begun to lease or purchased their electric car, there are a number of benefits such as reduced emissions (17%-30% lower than petrol and diesel vehicles) and lower running costs (particularly for those who are able to charge their vehicle at home). Some salary sacrifice schemes for electric cars also include the cost of installing a charging point, which can bring the costs of running an electric car down even further.
Ready to go?
Providing employees with an electric car salary sacrifice scheme is a great way of increasing the benefits to your staff without increasing the costs to your business. If you’re interested in setting one up for your organisation, check out this article from the RAC which provides a breakdown of the different financial agreements that are available to employees.
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