Buyer guide
Electric car leasing and salary sacrifice: the basics
Published · Example prices are real CarJab offers taken on ; dealer prices change.
There are two common ways to drive a new electric car for a monthly fee. A personal lease (PCH) is a contract between you and a leasing company, paid from your take-home pay. Salary sacrifice is an arrangement with your employer: you give up part of your gross salary in exchange for a car, and pay benefit-in-kind (BIK) tax on the car instead.
Personal EV leasing
An electric lease works like any other personal lease: an initial rental, then monthly rentals, an annual mileage allowance and a return inspection. The total is the initial rental plus one fewer monthly payment than the contract length (see how lease totals are calculated). The BVRLA Leasing Code also asks members to explain any charges for excessive battery degradation from fast charging or excess mileage, so check the contract for that.
| Fiat Grande Panda Electric La Prima 44kWh — lease (Select Car Leasing) | £264.58 a month, £264.58 initial rental (1+47), 48 months, 5,000 miles a year; total £12,699.84 |
|---|---|
| Volkswagen ID. Polo Life Launch Edition 37kWh — PCP (Swansway Garages) | £287.66 a month, £3,833 deposit, 48 months, 10,000 miles a year, optional final payment £9,740, 2.90% APR representative, cash price £25,555 |
Live electric offers: electric lease deals · electric PCP deals.
Salary sacrifice in brief
- Your employer leases the car and you agree a contract change to give up an amount of gross salary. Because the sacrifice comes out before income tax and National Insurance, you pay those on a lower salary.
- The car is a taxable benefit. You pay income tax on its cash equivalent: broadly the car's list price multiplied by HMRC's appropriate percentage, which depends on CO2 emissions (and electric range for plug-in hybrids).
- Since April 2017 most salary sacrifice benefits are taxed on the higher of the salary given up and the benefit value (optional remuneration arrangements, OpRA). HMRC says these rules do not apply to cars with CO2 emissions of 75g/km or less, so a zero-emission car is taxed on the normal benefit-in-kind value.
- HMRC says a salary sacrifice must not reduce your cash earnings below National Minimum Wage rates.
BIK rates for zero-emission cars (HMRC)
| Tax year | Appropriate percentage, 0g/km CO2 |
|---|---|
| 2025 to 2026 | 3% |
| 2026 to 2027 | 4% |
| 2027 to 2028 | 5% |
| 2028 to 2029 | 7% |
| 2029 to 2030 | 9% |
2025/26 to 2027/28 from HMRC's appropriate percentage tables (480 Appendix 2 and EIM24705); 2028/29 and 2029/30 from HMRC's policy paper confirming 2 percentage point rises in each of those years. Plug-in hybrids with 1 to 50g/km are taxed by electric range (4% to 16% in 2026/27 for 130+ miles down to under 30 miles).
Worked BIK example
Using the ID. Polo above as an illustration, and treating its £25,555 cash price as the list price (the real figure for tax is the P11D list price your employer reports, which can differ):
| List price × appropriate percentage | £25,555 × 4% = £1,022.20 taxable benefit a year |
|---|---|
| Tax at the 20% basic rate | £204.44 a year (about £17.04 a month) |
| Tax at the 40% higher rate | £408.88 a year (about £34.07 a month) |
Scottish income tax bands differ. This is the BIK tax only; the saving from salary sacrifice depends on how much salary you give up, your tax and National Insurance rates, and what the scheme includes. A lower salary may also affect pay-linked amounts such as pension contributions; ask your employer.
Personal lease or salary sacrifice?
If your employer offers a scheme, compare its monthly cost to you after tax savings and BIK with the total of a personal lease on the same car, term and mileage (initial rental + remaining payments, divided by the months). Personal leasing is open to anyone, is not tied to your job, and has no BIK. Check what a salary sacrifice scheme includes (some include insurance or maintenance) and what happens to the car if you leave your job. CarJab lists personal lease, PCP and HP offers only.
Questions and answers
What is the company car tax (BIK) rate for an electric car?
HMRC’s appropriate percentage for a zero-emission car is 3% in 2025/26, 4% in 2026/27 and 5% in 2027/28, rising to 7% in 2028/29 and 9% in 2029/30. You pay income tax at your marginal rate on the car’s list price multiplied by that percentage.
Is salary sacrifice cheaper than a personal lease?
It can be, because the sacrifice comes out of gross pay before income tax and National Insurance, while a personal lease is paid from net pay. You do pay BIK tax on the car. The answer depends on your tax band, the scheme’s price and what is included, so compare the scheme’s figure after BIK with a personal lease total.
Do the salary sacrifice (OpRA) rules apply to electric cars?
No. HMRC says the optional remuneration arrangement rules do not apply to cars with CO2 emissions of 75g/km or less, so an electric car is taxed on the normal benefit-in-kind value rather than the salary given up.
Does CarJab list salary sacrifice deals?
No. CarJab lists personal lease, PCP and HP offers from dealers. Salary sacrifice schemes are arranged through employers.
Sources
- GOV.UK (HMRC): Work out the appropriate percentage for company car benefits (480: Appendix 2)
- GOV.UK (HMRC internal manual): EIM24705: appropriate percentage ready reckoner
- GOV.UK (HMRC): Taxation of company cars: the appropriate percentage for 2028 to 2029 and 2029 to 2030
- GOV.UK (HMRC internal manual): EIM44060: optional remuneration arrangements, cars with CO2 emissions of 75g/km or less
- GOV.UK (HMRC): Salary sacrifice for employers
- GOV.UK: Tax on company benefits: company cars
- GOV.UK: Income Tax rates and Personal Allowances
- MoneyHelper: Leasing a car with Personal Contract Hire (PCH)
This guide is general information, not financial or tax advice. CarJab is not a lender or broker.