The majority of UK drivers, including thousands of nurses, doctors, council workers and bank workers, are largely unaware they could save thousands of pounds in tax and National Insurance (NI) if they choose to drive a brand-new battery electric vehicle (EV) – without having to fork out for a deposit, maintenance or even insurance.
This knowledge is particularly relevant after the Government’s news that they plan to discontinue NEW petrol, diesel and possibly hybrid car sales from 2035.
We can surely expect some sort of early financial support to buy EVs whereas previously the appetite seems to have been more towards hybrids because the list prices seem more affordable. In fact a recent survey from the AA suggests that VAT could be scrapped on electric vehicles to boost sales which the Government could well be looking at here.
Surprisingly, seven out of ten drivers surveyed by car salary sacrifice benefits provider, Tusker, were aware of the Government’s Cycle to Work scheme where employees are able to purchase a new bicycle from their salary before tax or NI had been deducted (lowering the bill of both as a result).
Yet fewer than one in ten of us were aware that they could do the same to purchase a new electric vehicle – helping to lower car emissions from EV transport AND save money.
How salary sacrifice schemes affect EV costs and sales
In 2016 Government introduced legislation which ensured salary sacrifice would be one of the most affordable ways to drive ultra-low emission vehicles (ULEV) and electric vehicles (EV). This meant that ULEVs, including EVs, would continue to be the most cost effective cars for employees to drive – through salary sacrifice – as they remained exempt from income tax and NI.
When coupled together with access to an OLEV grant, electric charging savings and the introduction of 0% Benefit in-Kind taxation from April 2020, salary sacrifice is now the cheapest way to drive electric.
Through salary sacrifice, EVs will be cheaper than petrol or diesel cars thanks to the way the scheme is set up to save NI and tax, as well as the Government’s introduction of 0% Benefit in Kind in 2020/21.
_For drivers, this represents an average saving of £220 per month from 2019 to 2020 when compared with retail deals, on top of the already great savings they are able to receive through salary sacrifice – which amount on average to £100 per month saving on income tax and NI.
And as insurance, breakdown cover and maintenance are included in some salary sacrifice schemes, as well as no deposit being required, the savings could be even greater than this throughout the lease of the vehicle.
For example, one of the cheapest city cars available, the Skoda Citygo, currently costs from £160 a month, enjoying tax efficiencies of £116 per month which simply aren’t available with leasing deals.*
For drivers wanting greater status or simply a larger crossover SUV, Tusker suggests the Audi e-tron 50 which is currently available for £510 per month, with tax efficiencies of £369.*
With three out of five motorists claiming they would drive an electric vehicle as their next mode of transport, but have felt that costs have been prohibitive, it is clear that range anxiety and lack of charging points are not just barriers for mass adoption of battery electric vehicles.
While 60 per cent of people who drive claiming not to know what salary sacrifice is, it’s clear that this is the most affordable solution for ordinary working people to drive electric, but they simply don’t know about it.
Paul Gilshan, CEO of the leading UK car salary sacrifice provider, Tusker, said: “For too long, a lot of people have felt priced out of the EV revolution. This was evident in the people we spoke to as part of our survey, with the majority thinking battery electric vehicles were only for those that do little mileage or those on high incomes.
“Salary sacrifice is nothing new but appears to be still an unknown to a lot of working people; it’s the solution to drive a new electric vehicle for both 20% and 40% taxpayers, but it seems the myth is that people think they can’t drive an EV unless they are on high salaries.
“Put simply, salary sacrifice is key to making battery electric vehicles affordable for the average British motorist and key to the UK significantly reducing emissions of transport.”
*Prices quoted will vary according to personal circumstances, scheme parameters, mileage and length of agreement. The above prices are based on a 40% taxpayer driving 7500 miles per annum for 36 months.
Tusker is a customer services focused company who manages fleets of cars for organisations within the public and private sectors, and is pioneering an easier and more cost effective way for employees to run a car via its salary sacrifice car scheme, with a particular focus on electric and low-emission vehicles.
Since 2000, Tusker has delivered 45,000 new cars to employees through its salary sacrifice scheme. 85% of orders through this scheme have been made by 20% taxpayers and its most popular orders for 2019 had battery electric powertrains.
As experts and leaders in the salary saving vehicle market, Tusker currently manages over 500 live schemes, taking time to work with companies to fully understand their requirements and implement a robust, compliant and tailored car scheme.