Electric company car tax is rising every year to 2029/30. If you run a business and you're thinking about an EV salary sacrifice scheme, or you already offer one, that raises a reasonable question: does the scheme still pay its way for the employer once benefit-in-kind (BiK) climbs?
On the published rates, yes. The employer's National Insurance saving shrinks as BiK rises, but it stays positive on every rate announced so far. Below we set out how the saving works, run the numbers year by year, and cover the practical points that decide whether a scheme suits your business.
How EV salary sacrifice works for an employer
An employee agrees to give up part of their gross salary. In return, the employer provides an electric car, usually leased through a scheme provider. Because the employee's contractual salary is lower, the employer pays less employer National Insurance on it.
The car is a taxable benefit, so the employer pays Class 1A National Insurance on its BiK value. For electric cars, BiK is set low, so the NI saved on the sacrificed salary is normally bigger than the Class 1A cost. That difference is the employer's saving.
HMRC's rules on salary sacrifice (formally, optional remuneration arrangements) usually tax a benefit on whichever is higher: the salary given up or the normal BiK value. Cars with CO2 emissions of 75g/km or less are exempt from that rule, so they're taxed on the normal BiK value (HMRC, "Salary sacrifice and the effects on PAYE"). That's why schemes focus on electric cars and low-emission plug-in hybrids.
What's happening to company car tax on electric cars?
The BiK rate for zero emission company cars has been published years in advance:
- 2026/27: 4%
- 2027/28: 5%
- 2028/29: 7%
- 2029/30: 9%
Sources: HMRC policy papers "Taxation of company cars: the appropriate percentage for tax years 2025 to 2026, 2026 to 2027 and 2027 to 2028" (21 November 2022) and "Taxation of company cars: the appropriate percentage for tax years 2028 to 2029 and 2029 to 2030" (30 October 2024).
For comparison, the top BiK rate for petrol and diesel cars is 37% in 2026/27. Even at 9%, an electric car is taxed at less than a quarter of that. Plug-in hybrids are a different matter: from 2028/29, hybrids emitting 1–50g/km move to 18%, then 19% in 2029/30 (HMRC, 30 October 2024). If your scheme allows hybrids, the numbers below won't apply to them in the later years.
How much does the employer save? A worked example
This is an illustration built from published tax rates, not a quote. The assumptions: an electric car with a list price (P11D value) of £40,000 and a gross salary sacrifice of £4,800 a year (£400 a month), for an employee earning above the employer NI threshold.
Employer National Insurance is 15% in 2026/27, charged on earnings above the secondary threshold of £5,000 a year (HMRC rates and thresholds for employers, 2026 to 2027). Class 1A NI on benefits is also 15%. So:
- NI saved on the sacrificed salary: 15% of £4,800 = £720 a year, every year.
- 2026/27, BiK at 4%: Class 1A of £240 (15% of £1,600). Net saving £480 a year.
- 2027/28, BiK at 5%: Class 1A of £300. Net saving £420 a year.
- 2028/29, BiK at 7%: Class 1A of £420. Net saving £300 a year.
- 2029/30, BiK at 9%: Class 1A of £540. Net saving £180 a year.
Over a four-year agreement starting in April 2026, that's a net NI saving of £1,380 per car in this example. Across a scheme with 10 drivers, roughly £13,800 over the four years, before any scheme costs. A cheaper car or a smaller sacrifice moves the figures, but the pattern holds: the saving is biggest in the early years and narrows as BiK rises.
What do employees get out of it?
Take-up decides whether a scheme is worth the effort, so the employee side matters too. The employee saves income tax and NI on the salary they give up, then pays income tax on the car's BiK value.
On the same £40,000 car and £400 a month sacrifice, a basic-rate taxpayer in England, Wales or Northern Ireland saves about £85 a month in 2026/27 compared with paying £400 from take-home pay, falling to about £52 a month at 9% BiK. A higher-rate taxpayer saves about £115 a month in 2026/27, falling to about £48 a month by 2029/30, because their BiK is charged at 40% while their NI saving is only 2% (rates from HM Treasury, Budget 2025 Annex A). Scottish income tax bands differ, so Scottish employees' figures will vary slightly.
The upshot for employers: the scheme is still attractive to staff on today's rates, and it's most attractive to employees who join early in the BiK timetable.
Does the 2029 salary sacrifice cap affect car schemes?
No. The £2,000 cap announced at Budget 2025 applies to pension contributions made through salary sacrifice. From 6 April 2029, pension contributions above £2,000 a year made this way will attract National Insurance for both employer and employee. Car schemes for cars emitting 75g/km or less are outside that measure (HMRC policy paper, "Salary sacrifice reform for pension contributions").
For employers that rely on pension salary sacrifice for NI savings, that makes an EV scheme one of the few remaining salary sacrifice benefits that still reduces employer NI.
What should employers check before setting up a scheme?
Pay can't drop below the minimum wage
A salary sacrifice arrangement must not take an employee's cash pay below the National Minimum Wage or National Living Wage (HMRC, "Salary sacrifice and the effects on PAYE"). The National Living Wage is £12.71 an hour from April 2026 for workers aged 21 and over (GOV.UK, National Minimum Wage and National Living Wage rates). This mainly affects lower-paid and part-time staff, so build a pay check into the sign-up process.
The knock-on effects of a lower salary
A lower contractual salary can reduce earnings-related payments such as statutory maternity pay, and the employer decides how it treats pension contributions (HMRC, "Salary sacrifice and the effects on PAYE"). Some mortgage lenders also look at post-sacrifice salary. Explaining this clearly at sign-up avoids awkward conversations later.
What happens when an employee leaves
This is the risk most employers ask about first. If a driver leaves part-way through an agreement, someone has to deal with the car. AMT's scheme sets out several ways to handle it: early termination cover, a contingency fund built from the employer's NI savings, sharing costs with the employee, or reallocating the car to another member of staff (AMT salary sacrifice scheme page). Decide your approach before launch and write it into the employee agreement.
Pay-per-mile tax from 2028
The government plans to introduce Electric Vehicle Excise Duty (eVED) from April 2028, at 3p a mile for battery electric cars and 1.5p a mile for plug-in hybrids. Legislation is still to come, so treat this as planned rather than final (House of Commons Library, "Electric vehicle excise duty (eVED)"). At 10,000 miles a year, 3p a mile is £300. Ask any scheme provider how it will treat eVED on agreements that run past April 2028. Our article on pay-per-mile road tax covers the background.
What does the employer have to manage?
Less than many expect. With the AMT salary sacrifice scheme, set-up is free and the scheme is managed by AMT. Employers can typically be ready in 2–4 weeks, and the monthly package covers servicing, maintenance, breakdown cover and road tax, with insurance available depending on how the employer sets up the scheme. The employer's ongoing job is mainly payroll: applying the sacrifice each month and reporting the benefit.
Beyond the NI saving, many employers offer a scheme for recruitment and retention, and for the effect on their fleet's emissions. Those benefits don't show up in the sums above, but they're often why a business starts.
Could the Budget on 28 October change things?
It could. The next Budget is on 28 October 2026. We won't guess what it will contain. What's already settled is the BiK timetable to 2029/30, which gives employers more certainty than usual when committing to 3–4 year agreements. We'll update this article if the Budget changes company car tax, employer NI or salary sacrifice rules.
So, is EV salary sacrifice still worth it for employers?
On the published rates, yes. An employer still saves National Insurance on every electric car in the scheme in every year to 2029/30, even though the saving narrows as BiK rises. The case is strongest for businesses with staff on stable salaries comfortably above minimum wage, and for those that start sooner, while BiK is lowest. Plan for leavers before launch, and check hybrid rules if you plan to include them.
If you'd like to see how a scheme would work for your business, our salary sacrifice page explains the AMT scheme for employers and employees. If you're comparing other options, our guides to company car vs car allowance and the tax benefits of leasing a company car may help.