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Budget 2025: EV Salary Sacrifice Schemes

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Bright Insights: Autumn Budget 2025

At Bright Solicitors, we help our clients stay ahead of employment law developments. One area to watch in the upcoming November 2025 Budget is the salary sacrifice scheme for electric vehicles (EVs).

What’s the Salary Sacrifice Scheme?

The EV salary sacrifice scheme lets employees lease an electric vehicle by giving up part of their gross salary. In return, they get:

  • Income tax and National Insurance savings.
  • Access to new or used EVs at up to 50% lower cost than traditional leasing.
  • All-inclusive packages covering insurance, maintenance, breakdown cover, and even home chargers.
  • A low Benefit-in-Kind (BiK) tax rate- just 3% in 2025/26, rising slowly by 1% each year until 2029/30.
  • Employers also benefit from reduced NICs and can reclaim 50% VAT on lease payments.

What Employers Need to Know

While the scheme is attractive, there are a few key responsibilities: 

  • Ensure salaries don’t fall below the National Minimum Wage after sacrifice. 
  • Update employment contracts to reflect salary changes and benefit entitlements. 
  • Report cars to HMRC and comply with BiK tax rules. 
  • Be aware of early termination fees and contract commitments (usually 2-4 years). 
  • Employers should ensure their staff are informed about the potential pay-per-mile tax for EVs, set to launch in 2028 following a public consultation. This new levy aims to offset declining fuel tax revenues. The scheme is expected to increase travel costs for employees who use EVs for commuting or business travel. 

What You Can Do Now 

  • Review your payroll setup to accommodate salary sacrifice. 
  • Speak to third-party providers to streamline administration. 
  • Update contracts and policies to reflect EV benefits. 
  • Educate employees on the financial and environmental advantages. 

Need Help Navigating the Changes? 

If you’re thinking about offering EV salary sacrifice to your team, we can help you set it up smoothly and conveniently. From contract updates to HMRC reporting, our Corporate and Employment Departments are here to support you.

Follow us for more legal insights or contact our Employment Department for more information.