Here’s eight reasons why an electric vehicle sacrifice scheme can offer huge benefits for both employers and employees.
The concept of making a salary ‘sacrifice’ to get behind the wheel of a new vehicle is one that’s been around for several decades now.
But the UK Government has made it incredibly attractive to use Salary Sacrifice as a means to enjoy an electric vehicle (EV) in particular through your business or your employer.
So if you’re thinking about swapping your petrol or diesel company car, or fleet, for an electrified one, now might be the perfect time.
That’s according to Sarah Worthington, Corporate Sales Manager at Select Car Leasing, one of the UK's largest independent specialists for car and van leasing.
This week Sarah and her team hosted a special Fleet Show at The Thames Valley Expo, an event held at the Green Park Conference Centre in Reading, Berkshire, and which helps like-minded businesses to connect with each other.
Among the seminars, workshops and networking sessions, Sarah (above, right) and colleague David Lewis (above, left), Head of Electric Vehicles & Energy at Select Car Leasing, were on hand to offer guidance and advice about the benefits of EVs for both fleets and company car drivers.
Sarah says:
“A vehicle Salary Sacrifice scheme is a great way for both employers and employees to make financial savings. Employers can see a reduction in their National Insurance Contribution (NIC) bill, while employees can save up to 40% on a brand new electric vehicle and take advantage of corporate manufacturer discounts.
A Salary Sacrifice scheme is also a great incentive when it comes to firms being able to recruit staff. And what we’re saying at Select Fleet Solutions is that electric vehicles (EVs) offer even greater benefits as a Salary Sacrifice vehicle than traditional petrol or diesel cars and vans.”
To find out precisely what a Salary Sacrifice scheme is, and why it might work for you, read on:
EVs can maximise the benefits of Salary Sacrifice
Sarah’s Select Fleet Solutions division typically deals with businesses who have 15 plus vehicles on their fleet. And she says that it’s with EVs that employers and employees can reap the greatest rewards.
She explains:
“Salary sacrifice is relatively simple. An employee ‘sacrifices’ part of their salary and gets a company car in return, and also pays less income tax and National Insurance. What’s in it for the employer? Well, they’ll often see a reduction in their National Insurance Contributions while it’s also a great way to attract, retain and reward staff.
An employee is required to pay what’s called ‘Benefit in Kind’ (BIK) tax on their company car.
And if what you save in tax and National Insurance is still greater than the BIK tax fee, the employee can ultimately save money. And this is where electric vehicles come in.
As a general rule of thumb, the less carbon dioxide (CO2) a car emits, the cheaper it will be when it comes to BIK tax.
And with a fully-electric vehicle, you’ll pay just 2% BIK, compared with 33% for something like the 1.3 litre petrol Nissan Qashqai. And that 2% BIK rate is fixed until the 2024/25 financial year.”
How else does an employer benefit?
Sarah:
“Setting up a Salary Sacrifice scheme is a ‘win-win’ for lots of businesses. Not only does it incentivise employees, it also lowers a firm’s carbon footprint while reducing their ‘grey fleet’ risks - ie, the challenges posed by personal vehicles being used for business purposes.”
Choose wisely
Sarah:
“I’d urge fleet managers to choose a vehicle provider that has access to multiple funders. That way, you’re sure to get sight of the most affordable deals. I’d also recommend that businesses transition as much of their fleet as they can to electric vehicles, in order to really maximise the potential benefits.”
PHEV or an EV?
Sarah:
“For a lot of people, a plug-in hybrid company car, as opposed to a fully-electric vehicle, might seem to have lots of advantages on the face of it. One of the big reasons someone might go for a PHEV instead of an EV is that they won’t have the ‘range anxiety’ that comes with a battery-electric vehicle.
But we see things slightly differently at Select Fleet Solutions.
EVs are still far more cost effective when it comes to Benefit in Kind than a PHEV. A plug-in hybrid Toyota RAV4, for instance, attracts a BIK tax of 8%. When you compare it with 2% for an EV, that’s a large difference.
The other thing I’d say is that the range between charges with modern EVs fit in well with the lifestyles of most people. In the electric Mercedes-Benz EQS (above), for example, you can comfortably travel from Reading to Edinburgh on a single charge.”
Excitement surrounding modern EVs:
Sarah:
“More and more exciting EVs are coming to market all of the time, and the choice doesn’t begin and end with the big German brands. We lease many Tesla Model 3s as company cars, as well as multiple award-winning cars such as the Kia Niro EV, Hyundai Ioniq 5 (above) and the Volkswagen ID.3.
The manufacturers from the Far East are really taking the fight to established brands such as BMW, Audi and Mercedes-Benz in the EV market.”
Rising cost of electricity? An EV can still save you money
David Lewis:
“Yes, the cost of electricity has risen sharply in the UK. But rest assured that fuelling an EV is still more cost-effective than a traditional petrol or diesel car when you charge at home.
Around 60% of motorists in the UK are able to charge an EV at home. And by charging at home, you access a cheaper electricity tariff than at a public charging station.
With the cost of electricity at the Energy Price Guarantee of 34p per kWh, it would, on average, cost around 10 per mile to fuel a typical EV.
A petrol or diesel car, on the hand, would cost around 20p per mile to fuel. Extrapolate that over a year and 10,000 miles, and you’re potentially saving more than £1,000 in fuel when driving an EV compared with an ICE (internal combustion engine) car.
Don’t believe us? Check out our new Fuel Cost Calculator tool.”
Setting up a Salary Sacrifice scheme is simpler than you might think
Sarah:
“And we can really help you here. Select Fleet Solutions can handle the implementation of your Salary Sacrifice scheme from start to finish. We offer a hassle-free, end-to-end solution for all of the vehicles that you need.”
Leasing an EV as a company car
Sarah:
“Leasing is a great way to fund your company car. You get the benefits of fixed monthly payments, minimal capital expenditure and no depreciation risk. For a lot of business car users, it’s hassle-free motoring, where you get to drive a brand new vehicle every two, three or four years. It makes financial sense, too.
The VAT is recoverable with a lease car, your road fund licence is included in your agreement, and you can choose a fully maintained contract that includes servicing, maintenance and the replacement of worn tyres. When you lease an electric car as part of Salary Sacrifice you’ll also pay no deposit.”
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