Written by UKSalarySacrificeCalculator Editorial. Reviewed against official UK guidance. Methodology
Electric Car Salary Sacrifice 2026/27: BiK Rates, Tax and NI Savings Explained
With the benefit-in-kind rate on zero-emission cars at just 3% for 2025/26 (rising to 4% in 2026/27), electric vehicle salary sacrifice remains one of the most tax-efficient ways to get a new EV. Here is how the numbers work.
How electric car salary sacrifice works
Under an EV salary sacrifice scheme, your employer leases an electric car and provides it to you as a benefit. You sacrifice a portion of your gross salary, typically the monthly lease cost plus insurance and maintenance, and in return you get use of the car. Because your gross salary is reduced, you pay less income tax and National Insurance. Your employer also saves 15% employer NI on the sacrificed amount, which some pass on to you in the form of a reduced sacrifice contribution.
The car is provided to you as a company car, which means it is subject to benefit-in-kind (BiK) tax. You pay income tax on the BiK value, which is calculated as P11D value × BiK percentage. For a zero-emission car in 2026/27, the BiK rate is 4%. So a £40,000 EV has a BiK value of £40,000 × 4% = £1,600 per year. A basic-rate taxpayer pays 20% × £1,600 = £320 in income tax on the benefit. A higher-rate taxpayer pays 40% × £1,600 = £640.
Worked example at £40,000 salary
Take an employee earning £40,000 who uses salary sacrifice to get a £35,000 P11D-value EV, with a monthly salary sacrifice of £600 (£7,200 per year). Their gross salary drops from £40,000 to £32,800. Income tax saving: approximately £7,200 × 20% = £1,440 (all in the basic-rate band). Employee NI saving: £7,200 × 8% = £576. Total annual saving before BiK tax: £2,016.
The BiK charge is £35,000 × 4% × 20% (basic-rate tax) = £280 per year. Net annual saving after BiK tax: £2,016 − £280 = £1,736. This means the employee is effectively getting a £35,000 electric car at a net cost of £7,200 − £1,736 = £5,464 per year, roughly £455 per month, instead of paying the full lease cost from after-tax income. For a higher-rate taxpayer, the income tax saving is 40% rather than 20%, making the deal even more attractive.
BiK rate trajectory: plan ahead
The EV BiK rate has been deliberately kept low to incentivise zero-emission vehicle adoption, but it is rising each year. The confirmed rates are: 2025/26 3%, 2026/27 4%, 2027/28 5%, 2028/29 7%, 2029/30 9%. If you are taking a 3-year lease starting in 2026/27, your BiK rate will change over the lease term. Factor in the 2027/28 (5%) and 2028/29 (7%) rates when calculating the total cost over the full scheme period.
Even at 9% in 2029/30, EV BiK is substantially lower than equivalent petrol or diesel rates (25%+). The salary sacrifice NI saving remains throughout, regardless of the BiK rate. So EV salary sacrifice will continue to offer meaningful savings even as the BiK rate rises.
Employer NI saving and passthrough
On a £7,200 annual sacrifice, your employer saves 15% × £7,200 = £1,080 in secondary NI. Some employers pass this directly back to you as a reduction in the required sacrifice amount. If your employer passes back 50% of their NI saving, your net sacrifice drops by £540 per year, a meaningful additional benefit. Ask your HR or benefits team whether NI matching is available on EV schemes; it varies significantly between employers.
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FAQ
What is the BiK rate for electric cars in 2026/27?
The benefit-in-kind rate for fully zero-emission (electric) cars is 4% of the car's P11D value in 2026/27, rising to 5% in 2027/28 and 7% in 2028/29. This is far below the rates for petrol and diesel cars, which range from 25% to 37% depending on CO2 emissions.
Is an electric car through salary sacrifice always cheaper than buying outright?
It is usually significantly cheaper in total cost of ownership terms, especially for higher-rate taxpayers, because the BiK tax is much lower than the income tax and NI you would have paid on the equivalent salary. The employer also saves NI. But you need to weigh the monthly sacrifice cost, the BiK charge, insurance and any excess mileage charges against alternative options.
What happens to the car at the end of the scheme?
At the end of the scheme term (typically 2–4 years), you usually return the car to the employer or leasing company. Some schemes offer an option to purchase at market value. The salary sacrifice arrangement ends and your gross pay returns to normal.