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EV myths busted: can you really save money by driving an EV?

30 / 09 / 21

In short, yes – you can.

If you make the choice to drive an electric vehicle (EV) through a salary sacrifice car scheme, cost is just one of the many benefits to you. It’s an all-inclusive package that’s covered by a regular monthly deduction straight from your gross salary. This means you’ll be saving money on your income tax and National Insurance (NI) contributions.

Here’s what you could save right now and for 2022/23 onwards – after which the NI increase is shown in brackets:

  • If you pay the higher rate of income tax, you’re saving 42% (43.25%) because you’re saving on 40% income tax and 2% (3.25%) NI contributions
  • If you pay the lower rate of income tax, you’re saving 32% (33.25%) because you’re saving on 20% income tax and 12% (13.25%) NI contributions.

And that’s not all. Cars driven through salary sacrifice schemes are defined as ‘company cars’. As a way of making EVs as appealing as possible, the government’s tax rate to represent this benefit that you’re receiving is extremely small – just 2% for 2022/23 until 2025.

This is called the Benefit-in-Kind (BiK) tax. For a company car which uses an internal combustion engine (ICE), this tax is much higher. It’s another reason why there’s never been a better time to make the transition to electric.

Let’s take a look at an example…

Driving a Tesla Model 3 Standard Range Auto using a salary sacrifice scheme

20% taxpayer
40% taxpayer
Vehicle List Price (P11D tax value) - £40,935
Example monthly gross deduction
£754
£754
This is the amount taken for the car each month from your gross salary, before Income Tax and National Insurance are deducted.
Income tax saving
-£151
-£302
This is the amount of Income Tax you could save on the gross salary deduction.
National Insurance saving
-£90
-£15
This is the amount of National Insurance you could save on the gross salary deduction.
Benefit-in-Kind tax charge
£14
£28
This is the tax payment made, which will be a maximum 2% of the car’s P11D value until 2025.
Example net monthly deduction from salary
£527
£465
This is the net cost to you, including savings and BiK tax.

*Figures correct as of July 2021 and do not reflect 2022/23 National Insurance increase. All figures are indicative only, customer policy terms and conditions apply.

Driving an EV through a salary sacrifice scheme can be much cheaper than leasing the same car privately. As well as tax benefits, the sum taken for the salary sacrifice also includes a hassle-free package:

  • Fully comp insurance
  • Road tax
  • Scheduled servicing and maintenance
  • Breakdown cover
  • Replacement tyres
  • Windscreen and glass cover
  • Accident management.

You could save thousands over the length of your vehicle term and you’ll also benefit from lower running costs. It really is a no brainer.

 

GET A SALARY SACRIFICE QUOTE

 
 

Are you eligible for the salary sacrifice car scheme in your organisation? Get a quote on a brand-new car today.

 

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