UK EV Salary Sacrifice (2026/27)
Electric-vehicle salary sacrifice schemes let employees swap gross salary for the use of a pure-EV company car. The sacrificed amount avoids Income Tax (20-45%) and employee NI (8% / 2%). The only cost back is a Benefit-in-Kind charge on 4% of the car's list price in 2026/27 - a tiny number compared to the headline sacrifice.
Net cost by tax band (2026/27)
Indicative figures assuming the listed annual sacrifice and a typical EV list price. Net cost = sacrifice - IT/NI saving + BIK tax. "Effective saving" is how much you keep of the headline sacrifice value.
| Tax band | Annual sacrifice | EV list price | BIK tax | Net cost | Effective saving |
|---|---|---|---|---|---|
| Basic rate (£12,571 - £50,270) | £8,000 | £35,000 | £280 | £6,040 | 25% |
| Higher rate (£50,271 - £100,000) | £12,000 | £50,000 | £800 | £7,760 | 35% |
| PA-taper (£100,001 - £125,140) | £15,000 | £60,000 | £1,440 | £7,140 | 52% |
| Additional rate (above £125,140) | £18,000 | £75,000 | £1,350 | £10,890 | 40% |
BIK rate staircase
| Tax year | EV BIK rate |
|---|---|
| 2025/26 | 3% |
| 2026/27 | 4% |
| 2027/28 | 5% |
| 2028/29 | 7% |
| 2029/30 | 8% |
| 2030/31 | 9% |
Frequently asked questions
- How does EV salary sacrifice work?
- An employee gives up part of their gross salary in exchange for the use of an electric company car. The sacrificed amount escapes both Income Tax and employee National Insurance because it never reaches the payroll as taxable income. Instead, the employee pays Income Tax (only) on a Benefit-in-Kind charge equal to 4% of the car's P11D list price in 2026/27 (rising 1 percentage point a year to 7% by 2028/29 under current legislation).
- Why is EV BIK so low?
- The government uses BIK rates to incentivise EV adoption. Petrol and diesel cars attract BIK rates of 14-37% depending on CO₂ emissions and fuel type; PHEVs sit at 4-16% depending on electric-only range. Pure EVs (zero CO₂ emissions at the tailpipe) sit at the bottom of the scale - 4% in 2026/27. The favourable rate has powered the explosive growth of corporate EV salary-sacrifice schemes since 2020.
- Is EV salary sacrifice better for higher-rate taxpayers?
- Yes - the saving compounds with the marginal rate. A basic-rate taxpayer saves 28% (20% IT + 8% NI) on the sacrificed gross. A higher-rate taxpayer saves 42% (40% + 2%). Inside the £100k PA-taper a higher earner saves 62%. The BIK tax cost (4% of list price × marginal IT rate) is small in absolute terms because the BIK base is tiny on EVs. Net effect: EV sacrifice typically nets a higher-rate taxpayer 40-50% off the lease cost vs 25-35% for a basic-rate taxpayer.
- What happens to my pension contribution?
- Salary-sacrifice pension contributions are calculated on the gross salary AFTER the EV sacrifice has been deducted - so the EV sacrifice reduces the base your pension contribution % applies to. If you contribute 5% to pension, sacrificing £8,000 a year for an EV reduces your annual pension contribution by £400. Employers sometimes preserve the pre-sacrifice salary as the pension base under "notional pay" arrangements - check your employer's scheme rules.
- Does EV sacrifice affect mortgage applications?
- It can. Most lenders use post-sacrifice salary as the assessable income figure, which reduces borrowing capacity. Lenders that consider the salary-sacrifice amount in affordability assessments (e.g. some specialist brokers) treat it more favourably but still reduce the borrowable figure relative to no-sacrifice. Discuss with a mortgage adviser before sacrificing if you are planning to buy within 12-24 months.
- How does the rising BIK rate affect long-term value?
- 2026/27 BIK is 4%. Under current legislation it rises to 5% in 2027/28, 6% in 2028/29, 7% in 2029/30, then 8% in 2030/31 and 9% in 2031/32. Three-year EV leases starting today lock in roughly average 5% over the term; four-year leases see slightly higher average rates. The headline savings shown on this page apply to 2026/27; later years are slightly less generous but still significantly cheaper than petrol BIK rates.