EV Salary Sacrifice Calculator 2026/27
Salary sacrifice for an electric vehicle works by reducing your gross salary in exchange for the car, which lowers the salary you pay Income Tax and National Insurance on. Because fully electric cars currently attract a very low Benefit-in-Kind (BIK) rate of just 4% for 2026/27 (rising gradually to 5% in 2027/28 and further in future years), the tax charged on receiving the car as a benefit is much smaller than the tax and NI you save by sacrificing salary — making EV salary sacrifice one of the most tax-efficient ways to get a new car in the UK right now.
Worked example: a basic-rate taxpayer sacrificing £500/month of gross salary for an EV lease saves 20% Income Tax and 8% NI on that amount (£140/month in combined tax and NI), while paying BIK tax on only 4% of the car's list price — for a £35,000 EV, that's roughly £1,400 of taxable benefit per year, taxed at their marginal rate (around £280/year for a basic-rate taxpayer, or about £23/month). The net effect is a significantly cheaper way to access a new EV compared with paying for the same lease from taxed income.
Higher and additional-rate taxpayers see even bigger proportional savings, since they save 40% or 45% Income Tax plus 2% NI on the sacrificed amount, while the BIK tax charge stays relatively low due to the 4% rate. This makes EV salary sacrifice particularly attractive for higher earners, though it's worth checking how sacrificing salary affects other things tied to your gross pay, like pension contributions calculated as a percentage of salary, mortgage affordability assessments, and student loan repayment thresholds.
Frequently asked questions
How does electric vehicle salary sacrifice work?
Your employer leases an EV and you agree to sacrifice a portion of your gross salary to cover the cost. Because the sacrifice happens before tax and National Insurance are calculated, you save both Income Tax and Employee NICs on the sacrificed amount — often making the EV significantly cheaper than leasing privately.
What is the Benefit in Kind tax rate for electric vehicles in 2026/27?
For 2026/27, the BiK rate for fully electric vehicles is 3% of the car's list price. This is substantially lower than petrol or diesel cars (typically 20–37%), which is what makes EV salary sacrifice so tax-efficient compared to traditional company car schemes.
Does EV salary sacrifice affect my pension contributions?
It can. Because salary sacrifice reduces your gross salary, it may reduce the base on which your pension contributions are calculated if your employer uses basic salary. It can also affect mortgage applications and some state benefits that are salary-linked. Check with your employer before committing.
Can I use EV salary sacrifice if I'm self-employed?
No. Salary sacrifice is only available to employees via their employer. If you are self-employed or a sole trader, you cannot access EV salary sacrifice. However, you can claim capital allowances or use HMRC's approved mileage rate (currently 55p/mile for the first 10,000 miles) for business journeys.
What happens to the car if I leave my job?
If you leave your employer before the lease ends, you typically have options including taking over the lease personally, returning the vehicle, or having a colleague take over. The terms vary by employer and lease provider — check the scheme rules before signing up.