Breaking Down the Numbers Behind Workplace Electric Car Benefits
Want to offer your team a benefit that actually pays for itself?
Electric car schemes for employees have stealthily become one of the UK’s most attractive benefits to offer. They are green, wallet-friendly and keep your staff happy – all in one go.
Here’s the kicker:
When done correctly, the maths works so that the entire scheme operates as a genuine cost neutral employee benefit. Absolutely no additional spend for the business.
Below, the numbers are broken down…
Here’s what’s coming up:
- Why Cost-Neutral Employee Benefits Are A Big Deal
- The Real Tax Savings Behind The Scheme
- The Employer Side Of The Numbers
- Why Uptake Is Growing Fast
- What Employees Actually Get Out Of It
Why Cost-Neutral Employee Benefits Are A Big Deal
Most employee benefits cost money.
Someone either pays for them directly, or they amortize the expense. This is why HR teams have such a difficult time getting buy-in for new benefits. There’s no budget.
Cost neutral benefits for employees are different. They succeed because the scheme design pays for the entire overhead of operating it.
Administration, setup and ongoing management fees are covered by National Insurance savings made by your business. Absolutely nothing is taken from your benefits budget. And that’s what’s making workplace electric car schemes so appealing at the moment. Providers such as The Electric Car Scheme have shown that the figures work – employers can operate the entire scheme for zero additional cost…
(That alone should make any finance director sit up.)
The Real Tax Savings Behind The Scheme
The savings start with salary sacrifice.
In essence, the employee sacrifices some of their gross salary for the car. As the sacrifice is made before tax and NI, there are lower deductions for both parties.
The car itself is subject to benefit-in-kind tax. However, for fully electric cars the charge is miniscule – only 4% for tax year 2026/27. Contrast this with the more than 30% BiK charge typically applied to petrol and diesel vehicles.
To simplify things, here’s a quick example. Say an employee on £45,000 salary chooses an EV that has a leasing cost of £500 per month. This totals £6,000pa that will be processed through salary sacrifice. As this £6,000 is removed from gross salary, the employee avoids paying both income tax and National Insurance on that £6,000.
The take-home pay reduction is nowhere near £500. Once you factor in the savings and the tiny BiK charge, it ends up being around £375 per month. That’s a saving of £125 per month – simply by paying the lease through payroll.
The Employer Side Of The Numbers
Ok, moving on to the employer side. This is where the magic happens cost-neutral-wise.
If an employee gives up a portion of their salary, the employer doesn’t pay National Insurance on it. Employer NI is now 15% from April 2025, so that equates to roughly £90 saved per employee per month. Or a little over £1,000 per year for one car.
Multiply that across a whole team and the numbers get serious very fast:
- 10 employees on the scheme = roughly £10,000 in annual NI savings
- 50 employees = around £50,000 a year
- 500 employees = close to £450,000 a year
That money easily pays for the running of the scheme. Whatever’s leftover can be ploughed back – some businesses use it to pay for even more subsidised leases, others allow more staff to join the scheme.
It’s why so many CFOs are signing off on these schemes without hesitation.
Why Uptake Is Growing Fast
Electric vehicles are not a niche choice anymore.
Data from the SMMT reveals that EVs make up roughly 23% of new car purchases in the UK today. That’s a huge increase from even a few years ago.
And there is a clear reason behind the spike…
Company cars schemes have enabled people who would have otherwise never been able to afford an EV to own one. Luxury vehicles such as Teslas and BMWs are now accessible to middle-income wage earners – thanks to some creative salary packaging.
Actually there are already over 40,000 vehicles on roads in the UK on salary sacrifice deals. That’s a big slice of the market – and it’s only increasing.
For employers, this matters for two big reasons:
- Recruitment: A real, useful perk that stands out on a job advert.
- Retention: After locking someone into a 3 or 4 year EV lease, they are much less likely to jump ship.
Point number two there is often overlooked. Yet it’s one of the primary motivations for HR pushing this benefit.
What Employees Actually Get Out Of It
Here’s where the numbers get personal.
For a higher rate taxpayer considering a mid-spec EV costing perhaps £600 a month to lease, their actual take-home pay saving slips to around £350 per month. Remember the “golden ratio” of 40% tax rate savings accrue much more quickly. That’s over £3,000 tax savings per year on a car they were planning to buy anyway.
But the financial savings is only part of the story…
Beyond the obvious figures, there is an entire benefits package wrapped into one monthly deduction for employees:
- A brand new electric car with no big deposit
- Insurance, servicing and maintenance bundled in
- Road tax sorted
- Lower running costs (charging is way cheaper than petrol)
- One simple line item on the payslip – nothing else to manage
This is as close to a “set it and forget it” benefit as you can get. All is included in one payment so you won’t have any unexpected expenses later.
For employees who were already wanting to make the switch to electric – this is by far the cheapest option available. For others, this allows you to test drive one without all the risks.
The Bottom Line
Employer electric vehicle benefits are one of the few benefits where the math actually adds up for everyone:
- The employee saves thousands and drives a brand new EV
- The employer saves on National Insurance and gets a powerful retention tool
- The business runs the whole thing as a true cost-neutral employee benefit
That kind of triple win is rare in the world of HR.
BIK rates are now frozen until 2030 and EV government grants have been extended until 2027. The time to take advantage of these rates is NOW. The more you leave it, the less time your employer has to secure the best tax treatment this scheme will ever see.
The statistics don’t deceive us – and they’re telling us one thing loud and clear right now.
