National insurance changes help drive salary sacrifice increase

An electric vehicle (EV) salary sacrifice provider has reported a significant increase in employers looking to launch a scheme since the Autumn Budget.

The Electric Car Scheme has highlighted changes to employers’ national insurance contributions (NICs), which rise from 13.8% to 15% from April, as being behind increasing interest in the employee benefit.

In addition, the Autumn Budget also announced that the threshold at which businesses start paying NI on a worker’s earnings will be lowered from £9,100 to £5,000.

Employers currently pay NI at 13.8% on a worker’s earnings above £9,100 a year or £175 a week.

Thom Groot, CEO and co-founder of The Electric Car Scheme, says that businesses are taking advantage of salary sacrifice to provide new and second hand EVs to their staff, while also decreasing their employer national insurance contribution. 

He explained: “The UK’s salary sacrifice scheme has been specifically designed to benefit both employees to make new and second hand EVs more affordable, and to benefit the businesses that roll out the scheme by reducing their national insurance contribution.  

“Now in its sixth year, the uptake has grown steadily year-on-year, however we are seeing even stronger growth as businesses realise the total benefits for both their staff and their bottom line.”

A salary sacrifice EV scheme allows employees to pay for vehicle leases from their pre-tax salaries, while also enjoying low benefit-in-kind (BIK) rates. Businesses also benefit by reducing their overall employer NICs. 

Interest in the EV salary sacrifice scheme has grown 160% year-on-year – driven by the increase in popularity of EVs, combined with the cost-of-living crisis making household budget tighter, says The Electric Car Scheme.

Since the end of October 2024 and the announcement of the NI increase, inquiries from businesses looking to implement the scheme have increased 21%. 

Also, the number of companies actually signing up has increased 34%, before the April NI changes.  

Employees are also taking up the scheme, with car orders up 22% since the Autumn Budget announcement. This has coincided with the growing availability and popularity of second hand EVs, which make EVs more financially accessible. 

Currently, almost half of all car orders from The Electric Car Scheme are for second-hand EVs. 

Employees are increasingly expecting this kind of benefit from their employers, with research from The Electric Car Scheme showing that 30% of employees now expect help from their employers to commute sustainably, up from 10% in 2023. 

“It’s good to see that this has translated into an increase in car orders, as employees take advantage of the considerable savings available through the scheme,” said Groot. 

“We started The Electric Car Scheme to make EVs more affordable and help increase uptake ahead of the phase-out of traditional cars. 

“It is also the reason that our second-hand EV proposition has been so popular, and it now makes up nearly half of our sales.” 

Find out how to make your salary sacrifice scheme a succes from Fleet News.