New scheme to save drivers up to 60% on electric cars

NimbleFins explains the new EV government-backed scheme.
Electric car charging

Drivers can save up to 60% on the cost of a new electric car under new Government-backed schemes.

Demand for salary sacrifice schemes to fund electric cars is booming after the Government slashed the tax rate for work benefits from 16% to 1% for electric vehicles (EVs) in April 2020.

Using the Government's salary sacrifice offer, the cost of the leasing a vehicle comes straight out of an employee's pay, before income tax is deducted. Then they only need to pay their normal income tax rate on 1% of the value of the benefit on top.

For example, if a Tesla cost £6,000 a year to lease, a 40% taxpayer would pay £3,600 under the scheme, or £300 a month, because it is being paid for before tax.

The higher a worker's tax band, the more they could save.

And there are benefits for the employer too, with lower National Insurance contributions to make per employee who signs up.

The Government's offer is similar to the Cycle to Work scheme which allows employees to save up to 39% on bikes and accessories.

It has taken a while for take up to get off the ground thanks to the process being complicated to access.

But since the Government slashed its electric vehicle grant twice in 2021 to £1,500 (for vehicles only up to the value of £32,000), new businesses are trying to plug the gap in the market.

One provider, The Electric Car Scheme, has set up a new service which opens the benefit up to smaller businesses, while also removing a lot of the risk which comes with the lease service.

Leases often last between three and five years, but if an employee wants to quit the lease before the term is over, the employer could be left with a large exit fee to pay.

With staff regularly moving jobs, being made redundant, or taking time off for parental or sick leave, this has made it risky for businesses to offer.

The Electric Car Scheme has removed this risk and believes all users will be able to save between 30 and 60% on the cost of leasing an EV.

Typical drivers save between £2,000 and £5,000 a year using The Electric Car Scheme, the company estimates.

It also supports employers through setting up a salary sacrifice scheme, which requires a change to an employee's contract.

Thom Groot, co-founder and CEO of The Electric Car Scheme, told “We’ve designed this with both the employer and employee in mind, so staff can drive new, electric cars at a 30 to 60 percent discount without creating a net cost or risk for their company.

“I encourage all UK employees that are looking to switch to driving electric to approach their company leadership team - whether it be via HR or finance - and request they look into this, as it really does benefit everyone.

“At The Electric Car Scheme, we are dedicated to making it a ‘no brainer’ decision for everyone to switch to driving electric, at an affordable cost.”

Another company on the market, Octopus Electric Vehicles, gives drivers the option to buy their vehicle at the end of the lease, much like purchase plans on the market for individual customers.

Fiona Howarth, who runs the company, told the Telegraph: “Grants have been reduced quite significantly over the last few years, and so it’s really important that we continue to support the rollout of EVs in a different way.”

To find out how much money you could save driving an electric car, click here.

Erin Yurday

Erin Yurday is the Founder and Editor of NimbleFins. Prior to NimbleFins, she worked as an investment professional and as the finance expert in Stanford University's Graduate School of Business case writing team. Read more on LinkedIn.


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